Shri Vishwa Dharmayatan, New Delhi v. ACIT, New Delhi

ITA 1128/DEL/2011 | 2007-2008
Pronouncement Date: 21-10-2010 | Result: Allowed

Appeal Details

RSA Number 112820114 RSA 2011
Assessee PAN ABJPS5374H
Bench Delhi
Appeal Number ITA 1128/DEL/2011
Appellant Shri Vishwa Dharmayatan, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 21-10-2011
Date Of Final Hearing 19-09-2011
Next Hearing Date 19-09-2011
Assessment Year 2007-2008
Appeal Filed On 01-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 1120/DEL/2011 ASSESSMENT YEAR: 2002-03 ITA NO. 1121/DEL/2011 ASSESSMENT YEAR: 2003-04 ITA NO. 1122/DEL/2011 ASSESSMENT YEAR: 2005-06 ITA NO. 1123/DEL/2011 ASSESSMENT YEAR: 2006-07 ITA NO. 1124/DEL/2011 ASSESSMENT YEAR: 2007-08 SHRI CHANDRA SWAMI VS. ASSISTANT COMMISSIONER OF IT C-18-19 CENTRAL CIRCLE 20 QUTAB INSTITUTIONAL AREA NEW DELHI. NEW DELHI. (PAN: ABJPS5374H) (APPELLANT) (RESPONDENT) ITA NO. 1125/DEL/2011 ASSESSMENT YEAR: 2002-03 ITA NO. 1126/DEL/2011 ASSESSMENT YEAR: 2005-06 ITA NO. 1127/DEL/2011 ASSESSMENT YEAR: 2006-07 ITA NO. 1128/DEL/2011 ASSESSMENT YEAR: 2007-08 SHRI VISHWA DHARMAYATAN VS. ASSISTANT COMMISSIONE R OF IT C-18-19 CENTRAL CIRCLE 20 QUTAB INSTITUTIONAL AREA NEW DELHI. NEW DELHI. (PAN: AAATV0507B) (APPELLANT) (RESPONDENT) ITA NO. 1245/DEL/2011 ASSESSMENT YEAR: 2002-03 ITA NO. 1246/DEL/2011 ASSESSMENT YEAR: 2005-06 ITA NO. 1247/DEL/2011 ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF IT VS. SHRI VISHWA DHARMAY ATAN CENTRAL CIRCLE-20 C-18-19 NEW DELHI. QUTAB INSTITUTIONAL AREA NEW DELHI. (PAN: AAATV0507B) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI MS SHEKH ON CA RESPONDENT BY: SHRI ROHIT GARG SR.DR 2 ORDER PER BENCH: IN THUS BUNCH OF TWELVE APPEALS FIVE ARE DIRECTED AT THE INSTANCE OF CHANDRA SWAMI AGAINST THE SEPARATE ORDERS OF LEARNE D CIT(APPEALS) DATED 28.12.2010 PASSED FOR ASSESSMENT YEARS 2002-03 TO 2 007-08 FOUR ARE DIRECTED AT THE INSTANCE OF VISHWA DHARMAYATAN TRUS T AGAINST THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) DATED 20.12.2010 AND 9.12.2010 PASSED FOR ASSESSMENT YEARS 2002-03 2007-08 2005-06 AND 2006 -07 RESPECTIVELY. THE REVENUE IS IN CROSS APPEALS IN THE CASE OF VISHWA D HARMAYATAN TRUST IN ASSESSMENT YEARS 2002-03 2005-06 AND 2006-07. THE ISSUES IN ALL THE APPEALS ARE INTER-CONNECTED THEREFORE WE HEARD TH EM TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OF THEM BY THIS COMMON ORDER . 2. FIRST WE TAKE ITA NOS. 1125 1120 & 1245/DEL/20 11 WHICH RELATES TO ASSESSMENT YEAR 2002-03. IN ASSESSMENT YEAR 2002-03 SHRI CHANDRA SWAMI HAS FILED HIS RETURN OF INCOME ON 23 RD JULY 2002 DECLARING NIL INCOME. SIMILARLY M/S. VISHWA DHARMAYATAN TRUST HAS FILED ITS RETURN OF INCOME ON 30 TH OCTOBER 2002 DECLARING TOTAL INCOME AT NIL. ASSESS ING OFFICER HAS PASSED THE ASSESSMENT ORDER IN THE CASE OF BOTH THE ASSESS EES ON 4 TH MARCH 2005 UNDER SEC. 143(3) OF THE ACT. HE FIRST PASSED THE O RDER IN THE CASE OF TRUST AND 3 OBSERVED THAT THE TRUST HAS RECEIVED DONATION OF RS .12 16 521. IT HAS BANK INTEREST OF RS.301. THE TOTAL RECEIPTS OF THE TRUST ARE RS.12 16 822. ASSESSING OFFICER OBSERVED THAT TRUST WAS NOT CARRYING OUT AN Y CHARITABLE ACTIVITY. ALL THE INCOME RELATES TO SHRI CHANDRA SWAMI HOWEVER HE ESTIMATED AN EXPENDITURE OF RS.1 LAC FOR RUNNING THE TRUST AND D ETERMINED THE TAXABLE INCOME AT RS.11 16 822. ON THE BASIS OF HIS FINDING IN THE BLOCK ASSESSMENT ORDER PASSED IN THE CASES OF BOTH THE ASSESSEES HE ARRIVED AT A CONCLUSION THAT INCOME IN THE HANDS OF THE TRUST DESERVES TO B E ASSESSED ON PROTECTIVE BASIS WHEREAS INCOME IN THE HANDS OF SHRI CHANDRA S WAMI DESERVES TO BE ASSESSED ON SUBSTANTIVE BASIS. ACCORDINGLY ADDITIO N OF RS.11 16 822 ON PROTECTIVE BASIS HAS BEEN MADE IN THE HANDS OF THE TRUST AND ON SUBSTANTIVE BASIS IN THE HANDS OF SHRI CHANDRA SWAMI. - 3. ON APPEAL LEARNED CIT(APPEALS) HAS OBSERVED THA T SINCE THE ADDITIONS IN THE HANDS OF SHRI CHANDRA SWAMI ARE BE ING CONFIRMED ON SUBSTANTIVE BASIS THEREFORE THERE IS NO NEED TO M AKE PROTECTIVE ADDITION IN THE HANDS OF THE TRUST. HE ACCORDINGLY DELETED THE ADDITION. 4. IN THE CASE OF CHANDRA SWAMI LEARNED CIT(APPEAL S) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. HE UPHELD T HE ASSESSMENT ORDER. 4 THE REVENUE IN ITS CROSS-APPEALS HAS SUBMITTED THAT THE ISSUE REGARDING TAXABILITY OF THE AMOUNT ON SUBSTANTIVE BASIS IN TH E HANDS OF SHRI CHANDRA SWAMI OR IN THE HANDS OF TRUST HAS NOT ATTAINED THE FINALITY THEREFORE LEARNED CIT(APPEALS) OUGHT TO HAVE NOT DELETED THE PROTECTIVE ADDITION. IN THE CASE OF CHANDRA SWAMI REVENUE HAS NOT FILED AN Y CROSS APPEALS. THE ASSESSEE IN HIS APPEAL HAS SUBMITTED THAT THE ITAT IN ASSESSMENT YEARS 1989- 90 TO 1993-94 HAS UPHELD HE GENUINENESS OF THE TRUS T. THIS ISSUE HAS BEEN DISCUSSED BY THE ITAT IN THE ORDER PASSED ON THE AP PEALS FOR THE BLOCK PERIOD. HE PLACED ON RECORD COPY OF THE ITATS ORDE R AND SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED. LEARNED DR WA S UNABLE TO CONTROVERT THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER HAS NOT RECORDE D ANY INDEPENDENT FINDING IN THIS ASSESSMENT ORDER. HE IS HARPING UPON THE OB SERVATIONS MADE BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT. WE FIND THAT THE ITAT HAS EXAMINED THIS ISSUE IN DETAIL. THE FINDING OF THE I TAT IN THE BLOCK ASSESSMENT WHEREIN IT HAS TAKEN COGNIZANCE OF THE F INDINGS RECORDED IN ASSESSMENT YEARS 1989-90 AND 1993-94 READ AS UNDER: 5 THE ASSESSMENT MADE BY THE A.O. IN THE CASE OF THE TRUST FOR THE A.Y. 1989-90 TO 1993-94 HAD COME IN APPEAL BEFORE T HE TRIBUNAL IN ITA NOS.771 TO 775(DEL)/98. IN PARA 2 TO 4 OF THE ORDER DATED 11-05- 2007 THE TRIBUNAL SUMMARIZED THE AOS ORDER AND CI T(A)S ORDER PERTAINING TO A.Y. 1989-90 AS UNDER:- ITA NO. 771(DEL)/1998- A.Y. 1989-90 2. EIGHTEEN GROUNDS WERE TAKEN IN THE FORM OF APPEA L (FORM NO. 36) FILED ON 10.2.1998. THESE GROUNDS WE RE REVISED TO SEVEN GROUNDS ON 25.8.2005. IN THE COURSE OF HEARING BEFORE US IT WAS POINTED OUT THAT THE APPE AL CONTAINED TWO BASIC GROUNDS NAMELY THAT ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) H AS (I) FAILED TO APPRECIATE THE FINDINGS RECORDED BY THE AP PELLATE TRIBUNAL IN ASSESSEES CASE FOR ASSESSMENT YEA R 1988-89 AND ERRED IN HOLDING THAT THAT ORDER WAS NOT APPLI CABLE TO THE FACTS OF THIS YEAR; (II) ERRED IN HOLDING THAT T HE TRUST WAS NOT VALIDLY CREATED OR WAS NOT GENUINE IN COMPLET E DISREGARD OF THE FACT THAT IT WAS DULY REGISTERED U/S 12-A O F THE ACT. BEFORE GOING INTO THE CONTROVERSY IT MAY BE W ORTHWHILE TO SUMMARIZE THE ORDERS PASSED BY THE ASSESSING OFF ICER AND THE LEARNED CIT(APPEALS). 3. IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE RETURN WAS FILED IN COMPLIANCE TO NOTICE U/S 148 ON 2 .12.1992 SHOWING DEFICIT OF RS. 74 878/-. IT WAS CLAIME D THAT THE ASSESSEE HAD CARRIED OUT SUBSTANTIAL CHARITABL E AND RELIGIOUS ACTIVITIES WHICH DID NOT REQUIRE EXPE NDITURE OF ANY MONEY. THEREFORE NO EXPENDITURE WAS SHOWN TO HAVE BEEN INCURRED IN THE BOOKS ON THE AFORESAID PURPOSES. THE ASSESSING OFFICER CALLED FOR PRODUCTION OF EVIDE NCE REGARDING ACTUAL CARRYING ON OF RELIGIOUS OR CH ARITABLE ACTIVITIES. HOWEVER NOTHING COULD BE BROUGHT ON RECORD IN THIS MATTER. THE ASSESSEE HAD DEBITED RENT AM OUNTING TO RS. 1.89 LAKH INTEREST AMOUNTING TO RS. 1 38 441/- AN D SOME OTHER MINOR EXPENSES UNDER THE HEADS GENERAL EXPENSES 6 PRINTING AND STATIONERY ETC. IN THESE CIRCUMS TANCES THE CLAIM THAT THE ASSESSEE ACTUALLY CARRIED OUT ANY CHARITABLE OR RELIGIOUS ACTIVITY WAS NOT ACCEPTED. 3.1 IT WAS POINTED OUT THAT THE TRUST PREMISES WERE USED BY SHRI CHANDRA SWAMI AS HIS RESIDENCE. HE WAS A LIFE TRUSTEE OF THE TRUST. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF HIS STAY IN THE ASHRAM AND THE EXPEN DITURE INCURRED ON HIM DURING SUCH STAY. HOWEVER TH ESE DETAILS WERE NOT FILED. IT WAS FURTHER POINTED OUT TH AT NO RECORD WAS KEPT ABOUT THE MOVEMENT OF SWAMIJI IN AND OU T OF THE ASHRAM. IT IS ALSO MENTIONED THAT IN THE COUR SE OF SEARCH OF THE PREMISES OF THE TRUST IT WAS FOUND THAT TH EY WERE USED AS RESIDENCE OF SHRI CHANDRA SWAMI AND AS A GUES T HOUSE TO ACCOMMODATE HIS DISCIPLES AND THE POSITION HAS N OT CHANGED SINCE THE DATE OF SEARCH. IN THE COURSE OF SEAR CH STATEMENT OF SHRI VALLABH VYAS IN-CHARGE OF BUILDING AT C- 4/41 SAFDARJUNG DEVELOPMENT AREA NEW DELHI FROM WHERE THE ACTIVITIES OF THE TRUST WERE BEING CARRIED OUT WAS RECORDED. HE DEPOSED THAT THE BUILDING WAS USED AS RES IDENCE OF SWAMIJI AND GUEST HOUSE FOR HIS DISCIPLES. IN VI EW THEREOF IT WAS HELD THAT THE ASSESSEE TRUST VIOLATED TH E PROVISIONS CONTAINED IN SECTION 13(1)(C)(II) READ WITH SECTION 13(2)AND SECTIONS 13(3)(A) AND (CC) OF THE ACT. IN VIEW OF THESE FACTS AND ALSO THE FACT THE DENIAL OF EXEMPTION FO R ASSESSMENT YEAR 1988-89 WAS CONFIRMED BY THE CIT(APPEALS) IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO EXEM PTION U/S 11 FOR THIS YEAR ALSO. 3.2 IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF ACCOUNT. THE ASSESSEE COULD NOT PRODUCE THE SAME. THEREFORE IT IS HELD THAT ONE OF THE CONDITIONS LAID DOWN FOR GRANT OF REGISTRA TION U/S12-A WAS NOT FULFILLED. THEREFORE IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT. 3.3 THE ASSESSING OFFICER ALSO NOTED CERTAIN OTH ER FACTS. IT WAS FOUND THAT RENT OF RS.1.89 LAKH WAS PAI D IN RESPECT OF AFORESAID PREMISES. THE PREMISES WERE NOT USED FOR ANY CHARITABLE PURPOSE BUT FOR STAY OF SWAMIJI AND H IS DISCIPLES. 7 THEREFORE THIS AMOUNT WAS NOT ALLOWED TO BE D EDUCTED IN COMPUTING THE INCOME. IT WAS FURTHER NOTED THA T THE ASSESSEE DEBITED A SUM OF RS. 1 38 441/- AS INTEREST PA YABLE TO SHRI HARAK CHAND LALIT KUMAR NAHTA (HUF). THIS AMOUNT ALONG WITH PRINCIPAL AMOUNT WAS NOT PAID TILL THE CLO SE OF THE PREVIOUS YEAR. LIABILITY OF RS. 7 65 441/- WAS S HOWN DUE TO THE AFORESAID HUF. HOWEVER THE BOOKS OF THE HUF SHOWED THE LIABILITY OF RS. 7 72 700/- AS ON TH AT DATE AS PER THE CONFIRMATION FILED BY IT. IN VIEW OF THE D ISCREPANCY THE ASSESSEE WAS REQUIRED TO RECONCILE THE SAME. HOWEVER NO SATISFACTORY EXPLANATION COULD BE PROVIDED. IT W AS NOTED THAT AN ADVANCE OF RS.5.00 LAKH WAS TO BE PAID TO THE OWNER OF THE PREMISES AS DEPOSIT AND THE AMOUNT WAS TAKEN AS LOAN FROM THE AFORESAID HUF. THE INTEREST RE LATED TO THE AFORESAID ADVANCE. HOWEVER SINCE THE PREMISES WERE NOT USED FOR THE PURPOSE OF FURTHERING THE OBJECTS O F THE TRUST THE AFORESAID EXPENDITURE BY WAY OF INTEREST WAS ALSO NOT ALLOWED IN COMPUTING THE INCOME. 3.4 IN THE COURSE OF SEARCH IN 1988 AT THE PREMIS ES OF THE TRUST A SUM OF RS. 20 000/- WAS SEIZED. SHRI V ALLABH VYAS IN-CHARGE OF THE PREMISES DEPOSED IN STATEMENT U/S 132(4) OF THE ACT THAT THE MONEY BELONGED TO THE TRUS T. HOWEVER IN THE COURSE OF ASSESSMENT IT WAS STATED THAT MONEY BELONGED TO ONE OF THE DISCIPLES SHRI BHUPINDER SINGH R/O CHARAKH DHONI HARYANA. THIS EXPLANATION COULD NOT BE SUBSTANTIATED. THEREFORE THE AMOUNT WAS ADDED TO THE INCOME FROM UNDISCLOSED SOURCES. IN THE YEAR UN DER CONSIDERATION SHRI CHANDRA SWAMI HAD UNDERTAKEN FOREIGN AND INLAND TOURS. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF THE TOURS AND THE EXPENDITURE INCURRED THEREON. IT WAS EXPLAINED THAT THE EXPENSES WERE MET OU T OF CASH GIFTS OR DONATIONS RECEIVED FROM THE DEVOTEES. HOWEVER DONORS WERE NOT IDENTIFIED AND THE AMOUNT OF EXP ENDITURE OR DONATIONS WERE ALSO NOT QUANTIFIED. THE ASSE SSEE WAS REQUIRED TO PRODUCE A COPY OF HIS PASSPORT. TH E SAME WAS NOT DONE. SWAMIJI HAD ALSO VISITED BOMBAY HY DERABAD MADRAS BY AIR ON SIX OCCASIONS. THE AIR FARE WAS TAKEN INTO ACCOUNT BUT THE SOURCE OF EXPENDITURE DURING THE STAY WAS NOT EXPLAINED. THEREFORE A SUM OF RS. 1.50 LAKH IN RESPECT OF 8 FOREIGN TOURS AND RS. 50 000/- IN RESPECT OF INLAND TOURS WERE ADDED TO THE INCOME. THUS THE TOTAL INC OME WAS COMPUTED AT RS. 4 72 560/- AGAINST THE RETURNED L OSS OF RS. 74 878/-. 4. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) T HAT THE TRUST WAS CREATED BY SHRI SURAJ PRASAD GUPTA S/ O LATE LALA BANDRA SINGH VIDE TRUST DEED DATED 30.6.1980 HE SETTLED AN AMOUNT OF RS. 10 000/- TOWARDS THE CORPUS OF THE TRUST AND SHRI CHANDRA SWAMI S/O SHRI DHARAM CHAND GANDHI S HRI SURAJ PRASAD GUPTA SETTLOR AND SHRI PAWAN KUMAR SHARMA S/O LATE JAGNATH CHAND SHARMA WERE APPOINTED T HE TRUSTEES OF THE TRUST. SHRI CHANDRA SWAMI WAS A PPOINTED AS THE LIFE-TRUSTEE. THE AIMS AND OBJECTS OF THE TRUST WERE THE RELIEF OF THE POOR AND OTHER CHARITABLE ACTIVI TIES. IT WAS INTER-ALIA PROVIDED THAT TOTAL NUMBER OF TRUST EES SHALL NOT BE MORE THAN 10 AND SHRI CHANDRA SWAMI SHALL BE TH E MAIN TRUSTEE THROUGHOUT HIS LIFE AND HE SHALL ENJOY THE PRIVILEGES OF THE CHAIRMAN FOR ANY MEETING OF THE TRUSTEES GOVERNING BODY AND GENERAL MEETING AT WHICH HE SHALL BE PR ESENT. IT SHALL NOT BE COMPETENT FOR ANY OTHER TRUSTEE E ITHER BY RULE RESOLUTION OR OTHERWISE TO DEPRIVE HIM OF HIS LEGAL RIGHT TO BE THE LIFE TIME CHAIRMAN. IN THE CONTEXT OF THIS CLAUSE THE LEARNED CIT(A) OBSERVED THAT SHRI CHANDRA SWAMI HAD OVERRIDING AND EXTRAORDINARY POWERS OVER THE AF FAIRS OF THE TRUST ALTHOUGH NOT A SINGLE RUPEE WAS CONTRI BUTED BY HIM TO THE TRUST. FOR THIS YEAR THE ASSESSEE DID N OT PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. I N VIEW THEREOF IT WAS POINTED OUT THAT ONE OF THE C ONDITIONS LAID DOWN FOR REGISTRATION OF THE TRUST U/S 12A(B) OF THE ACT WAS NOT FULFILLED. 4.1 THE MAJOR EXPENDITURE INCURRED IN THIS YEA R WAS IN RESPECT OF THE RENT PAID FOR THE PREMISES AMO UNTING TO RS.1.89 LAKH AND INTEREST PAYABLE TO HARAK CHA ND LALIT KUMAR NAHTA (HUF) AMOUNTING TO RS. 1 38 441/- IN RESPECT OF LOAN OF RS. 7 65 441/-. THE CONFIRMATION LET TER SHOWED THE LOAN AT RS.7 72 700/- AND THE DISCREPANCY WAS NO T RECONCILED EVEN THOUGH THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO DO THE SAME. THE LOAN WAS TAKEN FOR MAKING A DVANCE 9 PAYMENT TO SHRI DARA SINGH THE WRESTLER AND THE ACTOR AS OWNER OF THE PROPERTY. APART FROM THIS EXPENSES OF RS.248/- RS. 106/- AND RS. 187/- WERE INCURRED ON PRINTIN G AND STATIONERY POSTAGE AND TELEGRAM AND GENERAL EXPENSES RESPECTIVELY. 4.2 DURING THE COURSE OF SEARCH IN 1988 A SUM OF RS. 20 000/- WAS SEIZED AND THE PERSON IN-CHARGE OF THE PREMISES SHRI VALLABH VYAS DEPOSED TO THE EFFECT THAT TH E MONEY BELONGED TO THE TRUST. HOWEVER LATER ON IT W AS CLAIMED THAT THE MONEY BELONGED TO A DISCIPLE WHO COU LD NOT BE PRODUCED IN SPITE OF REPEATED OPPORTUNITIES GI VEN IN THIS BEHALF. APART FROM THAT SHRI CHANDRA SWAMI UND ERTOOK A NUMBER OF FOREIGN TOURS AND INLAND TOURS FOR W HICH NO SATISFACTORY EXPLANATION WAS GIVEN AS TO THE S OURCE OF THE EXPENDITURE. THEREFORE A SUM OF RS. 1.50 LAKH IN RESPECT OF FOREIGN TOURS AND RS. 50 000/- IN RESPECT OF I NLAND TOURS WERE ADDED TO THE INCOME OF THE ASSESSEE. THUS WHILE A SUM OF RS. 2 20 000/- WAS ADDED AS INCOME OF THE A SSESSEE EXPENDITURE AMOUNTING TO RS. 3 27 441/- IN RESPE CT OF RENT AND INTEREST WAS DISALLOWED LEADING TO COMPUTA TION OF TOTAL INCOME AT RS.4 72 550/-. 4.3 THE LEARNED CIT(A) REFERRED TO THE DECISION OF HON'BLE ITAT PUNE BENCH IN THE CASE OF RAJNISH FOUNDAT ION IN ITA NO. 174/PN/82 FOR ASSESSMENT YEAR 1976-77. IN T HAT CASE THE ONLY OBJECT OF THE TRUST WAS TO ESTABLISH PROJECT AND PERPETUATE IMAGE OF SHRI RAJNISH WITH ALL THE VA GUE AND CONTRADICTORY VIEWS WHICH COULD NEITHER BE CALLE D RELIGIOUS NOR EDUCATIONAL NOR CHARITABLE IN NATURE NOR O F GENERAL PUBLIC UTILITY. IT WAS HELD THAT THE IDENTIT Y OF SHRI RAJNISH WITH THE TRUST WAS COMPLETE AND HE CONTROLLED ALL THE AFFAIRS OF THE TRUST WITH NO CORRESPONDING OBLIGA TION. HE WAS FREE TO PREACH VAGUE CONTENTS IN THE MANNER HE LIKED. ON THESE OBJECTS THE HON'BLE ITAT CAME TO THE CONC LUSION THAT THE PURCHASE OF VEHICLE COULD NOT BE SAID TO BE AN EXPENDITURE FOR CHARITABLE PURPOSES. THEREFORE THE INCOME WAS NOT APPLIED FOR RELIGIOUS OR CHARITABLE PURPO SES. THUS THE CLAIM OF EXEMPTION TO THE ASSESSEE WAS DENI ED. THE LEARNED CIT(APPEALS) WAS OF THE VIEW THAT THE R ATIO OF THAT 10 ORDER COVERED THE FACTS OF THIS CASE ALSO. NO EXPENDITURE WAS INCURRED ON ANY RELIGIOUS OR CHARITABLE PUR POSE WHILE INTEREST AND RENT WERE PAID IN RESPECT OF A P ROPERTY WHICH WAS USED BY SHRI CHANDRASWAMI AS HIS RESIDENCE AND GUEST HOUSE BY HIS DISCIPLES. AS NO OTHER CHARITABLE ACTIVITY WAS CARRIED OUT IN THIS YEAR AND THE PROPERTY WAS U SED BY SHRI CHANDRASWAMI IT WAS HELD THAT THE ASSESSEE TRUST VIOLATED THE PROVISIONS CONTAINED IN SECTIONS 13(1)(C)(I I) READ WITH SECTION 13(2)(B) AND 13(3)(A) AND 13(3)(EE) OF T HE ACT. THUS THE CLAIM FOR EXEMPTION WAS DENIED AND TH E ORDER OF THE ASSESSING OFFICER WAS UPHELD. 49. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW AND SUBMSISINS OF BOTH THE PARTIES THE TRIBUNAL DECIDE D THE MATTER VIDE PARA 8 TO 9.9 OF THE ORDER DATED 11-05-2007 IN A.Y. 1989-90 AS UNDER:- 8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. IT MAY BE WORTHWHILE TO SUMMARI ZE THE FACTS OF THE CASE OF THIS YEAR ON THE BASIS OF SUBM ISSIONS MADE BEFORE US ORALLY AND IN WRITING. THE ASSESSE E IS A TRUST WHICH HAS BEEN REGISTERED UNDER SECTION 12-A OF THE INCOME- TAX ACT. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE ON OR ABOUT 23.2.1998. IN THE COURSE OF SEARCH STATEMENT OF SHRI VALLABH VYAS IN-CHARGE OF THE PREMISES OF ASSESSEE TRUST WAS RECORDED. THE SUM AND SUB STANCE OF THE STATEMENT IS THAT BUILDING SITUATED AT C-4/41 S AFDARJUNG DEVELOPMENT AREA NEW DELHI WAS A RESIDENCE OF SHRI CHANDRASWAMI AND WAS ALSO USED AS A GUEST H OUSE FOR HIS DISCIPLES. THERE WAS NO OFFICE IN THIS BU ILDING. SHRI CHANDRASWAMI WAS OCCUPYING ROOM NO. 8. THERE W ERE NO BOOKS OF ACCOUNT AVAILABLE IN THE PREMISES. THE RETURN OF INCOME WAS FILED ON 2.12.1992 AFTER THE SEARCH SHOWING A DEFICIT OF RS. 74 878/-. ON EXAMINATION OF THE RETURN IT WAS FOUND THAT THE ASSESSEE HAD NOT INCURRED ANY EXP ENDITURE ON THE AVOWED OBJECTS OF THE TRUST. THE MAJOR EXP ENDITURE WAS ON RENT OF THE PREMISES AND INTEREST ON LOAN T AKEN FOR PLACING DEPOSIT WITH THE OWNER OF THE PREMISES F OR THE PURPOSES OF RENT. THE ASSESSEE WAS NOT ABLE TO P RODUCE BOOKS 11 OF ACCOUNT BECAUSE THEY WERE SEIZED BY STAT UTORY AUTHORITIES. HOWEVER ON THE BASIS OF DATA M ADE AVAILABLE THE BOOKS WERE RE-CONSTRUCTED AND PRODUCED. ON THE BASIS OF STATEMENT OF SHRI VALLABH VYAS THE ASSESSIN G OFFICER CAME TO THE CONCLUSION THAT THE BUILDING WAS USED FOR THE RESIDENCE OF SHRI CHANDRASWAMI THE LIFE TRUSTEE AND FOR ACCOMMODATING HIS DISCIPLES. THEREFORE IT WAS HELD THAT BENEFIT HAS BEEN EXTENDED TO THE PROHIBITED PE RSONS MENTIONED U/S 13. APART FROM INTEREST AND RENT THERE WERE VERY MEAGER EXPENSES IN RESPECT OF PRINTING AN D STATIONERY POSTAGE AND TELEGRAM AND GENERAL EXPENSES. SIN CE NO RELIGIOUS OR CHARITABLE ACTIVITY WAS CARRI ED OUT AND THE PREMISES WERE USED BY A PROHIBITED PERSON TH E ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11. APART FROM THAT HE ADDED TWO SUMS OF RS. 2.00 LAKH AND RS. 20 000/- TO THE INCOME IN RESPECT OF UNEXPLAINED EXPENDITURE ON INLAND AND FOREIGN TOURS OF SHRI CHANDRASWAMI AND CASH FOUND IN THE TRUST PREMISES. 8.1 THE CASE OF THE ASSESSEE WAS THAT IT WAS A RELIGIOUS AND CHARITABLE TRUST. IT WAS CARRYING ON S UCH ACTIVITY FOR WHICH CONTRIBUTIONS WERE MADE BY THE DISCIPLES AND AS SUCH THE INCOME AND EXPENDITURE WERE NOT ENTER ED IN THE ACCOUNTS OF THE ASSESSEE. SHRI CHANDRASWAMI HAR DLY STAYED IN THE PREMISES. IN ANY CASE HIS STAY IN THE PREMISES WAS ONLY FOR THE PURPOSE OF THE TRUST. THE ASSESSEE HAD NOT SPENT ANY AMOUNT ON THE INLAND AND FOREIGN TOURS OF SHRI CHANDRASWAMI. THE SUM OF RS. 20 000/- BELONGED TO A DISCIPLE WHO WAS IDENTIFIED BUT COULD NOT BE P RODUCED BEFORE ANY OF THE LOWER AUTHORITY. THEREFORE HIS CASE WAS THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 IN RESPECT OF RENT AND INTEREST. THE LEARNED CIT(APPEALS) HELD THAT THE FUNDS OF THE TRUST WERE UTILIZED WITH THE SOLE OBJEC T OF GLORIFYING SHRI CHANDRASWAMI. ITS ACCOUNT SHOWED THAT NO CHARITABLE ACTIVITY WAS BEING CARRIED ON. THE PREMISES WERE USED BY SHRI CHANDRASWAMI A PROHIBITED PERSON. THEREFOR E THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION U/S 11 AND THE ASSESSEE WAS NOT A PUBLIC CHARITABLE TRUST. HE ALSO CONFIRMED THE ADDITIONS OF THE TWO SUMS OF RS. 2.00 LAKH AND 12 RS. 20 000/- BY ACCEPTING THE ARGUMENTS FURNISHE D BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 8.2 BEFORE PROCEEDING WITH THE DETERMINATION OF T HE CONTROVERSY AT HAND WE MAY ALSO SUMMARIZE T HE FINDINGS OF THE HON'BLE ITAT IN THE ORDER FOR ASSESSMENT YEAR 1988- 89. THE QUESTION BEFORE THE TRIBUNAL WAS WHET HER THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11(1)( A) OF THE INCOME-TAX ACT? THE TRIBUNAL NOTED THE FACT RE GARDING THE SEARCH AND SEIZURE OPERATION ON 23.2.1988 FALL ING IN ASSESSMENT YEAR 1989-90. IT WAS FURTHER NOTED THAT THE INCOME AND EXPENDITURE ACCOUNT SHOWED SURPLUS OF RS. 1 941/-. THE MAIN EXPENDITURE WAS IN RESPECT O F INTEREST AND RENT OF RS. 60 000/- AND RS. 1 08 000/-. A SUM OF RS. 22 260/- WAS ALSO SPENT TOWARDS SALARY AND W AGES AND OTHER ADMINISTRATIVE EXPENSES. THE OBJECTS O F THE TRUST WERE ALSO TAKEN NOTE OF BY THE HON'BLE TRIBUNAL . ON GOING THROUGH THE OBJECTS IT WAS MENTIONED IN PARAGRAP H 11 THAT THE TRUST WAS CREATED WHOLLY FOR RELIGIOUS A ND CHARITABLE PURPOSES. ONE OF THE OBJECTS WAS TO DISTRIBUT E FOOD RUGS BLANKETS AND CLOTHES TO THE POOR WHICH GETS SOM E SUPPORT FROM THE STATEMENT OF SHRI VALLABH VYAS WHEN IT WAS DEPOSED THAT 15 TO 20 PERSONS USED TO DINE AND F OOD WAS SERVED TO THEM BY SPENDING THE OFFERINGS MAD E TO THE GOD IN ROOM NO. 6. IN THIS CONNECTION IT WAS NOT ED THAT THE VALUE OF OFFERING AND THE EXPENDITURE ON FOOD W ERE NOT RECORDED IN THE BOOKS. IT WAS THE VIEW OF THE TRIBUNAL THAT THIS MAY BE AN IRREGULARITY IN THE ACCOUNTS M AINTAINED BY THE TRUST BUT IT DOES NOT MILITATE AGAINST THE QUALITY OF EVIDENCE ABOUT THE USER OF TRUST MONEY ACCO RDING TO THE AIMS AND OBJECTS OF THE TRUST. THE HON'BLE TRIBU NAL ALSO TOOK NOTE OF THE FACT THAT THE TRUST HAS BEEN REG ISTERED U/S 12-A BY THE COMMISSIONER. IT HAD ALSO BEEN GRANTED RECOGNITION U/S 80-G AND THE RENEWAL APPLICATION FOR THE PE RIOD 1.7.1987 TO 31.12.1991 WAS PENDING WITH THE COM MISSIONER. THE HON'BLE TRIBUNAL ALSO TOOK NOTE OF THE FAC T THAT WHILE PROFIT & LOSS ACCOUNT BALANCE-SHEET AUDITORS REPORT WERE FILED THE BOOKS OF ACCOUNT WERE NOT PRODUCED O N THE GROUND THAT THEY WERE NOT TRACEABLE AND THE BOOKS MIG HT HAVE BEEN SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARCH. IT 13 WAS HELD THAT SUCH NON-PRODUCTION NEED NOT CREA TE ANY SERIOUS DOUBT ABOUT THE GENUINENESS OF THE EXPE NDITURE INCURRED BY THE ASSESSEE. HAVING CONSIDERED VARIOUS CASES CITED BY THE RIVAL PARTIES IT WAS HELD IN PARAGRAPH 27 THAT THE EXPENDITURE BY WAY OF RENT INTE REST SALARY AND WAGES PAID TO EMPLOYEES AND OTHER ADMINISTRATIVE EXPENSES WERE TO BE CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES. THIS FINDIN G SEEMS TO BE SOMEWHAT AT VARIANCE WITH DECISION OF HON'BLE GUJARAT HIGH COURT EXTRACTED ON PAGES 24 AND 25 TO THE EFFECT THAT FIRSTLY THE COMMERCIAL INCOME HAS TO BE DETERMINED A FTER DEDUCTING OUTGOINGS INCLUDING INCOME-TAX AND SU CH INCOME WILL BE THE INCOME AVAILABLE FOR APPLICATION TOWA RDS OBJECTS OR ACCUMULATION ETC. IN VIEW THEREOF EXPENSE S ON INTEREST RENT SALARIES WILL BE OUTGOINGS AND NOT APPLIC ATION OF INCOME U/S 11(1)(A). FOR THE SAKE OF READY REFERENCE THE PORTION OF THE DECISION EXTRACTED BY THE TRIBUNAL IS REPR ODUCED BELOW:- THE VIEW TAKEN BY THE COURTS IN THE ABOVE REFERRED CASES IS THAT BEFORE DETERMINING THE INCOME WHICH COULD BE ACTUALLY APPLIED OR ACCUMULATED FOR THE PURPOSES OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT ALL OUTGOINGS INCLUDING THE OUTGOING IN THE NATURE OF PAYMENT OF INCOME-TAX MUST BE DEDUCTED. IT IS ONLY FROM THE SURPLUS INCOME THAT REMAINS IN THE HANDS OF THE TRUSTEES THAT ACTUAL APPLICATION O R ACCUMULATION FOR THE PURPOSES OF THE TRUST CAN BE EXPECTED. IF THERE IS NO INCOME WHICH COULD B E ACTUALLY APPLIED OR ACCUMULATED BY THE TRUSTEE S FOR THE PURPOSES OF TRUST THE TRUSTEES WOULD NO T BE CAPABLE OF ACTUALLY APPLYING OR ACCUMULATING THE INCOME FOR TAKING THE BENEFIT OF SECTION 11(1)(A) OF THE ACT. THEREFORE EVEN IN THE CAS E OF AN ASSESSEE FOLLOWING THE MERCANTILE SYSTE M OF ACCOUNTING THERE CAN BE NO DOUBT THAT FOR T HE PURPOSES OF ACTUAL APPLICATION OR ACCUMULATION OR SETTING APART OF INCOME FROM TRUST PROPERTY FOR THE PURPOSES OF THE TRUST THE TRUSTEES M UST 14 HAVE ON HAND INCOME WHICH COULD BE SO UTILIZED AND WHAT ARE OUTGOINGS TOWARDS PAYMENT OF INCOME-TAX MUST BE DEDUCTED FOR WORKING OUT SUCH SURPLUS INCOME. IF A NOTIONAL INCOME CALCULATED ON THE BASIS OF ACCRUAL UNDER THE MERCANTILE SYSTEM OF ACCOUNT IS CONCEIVED AS INCOME FOR THE PURPOSES UNDER SECTION 11(1)(A) OF THE ACT IT MUST BE CONCEDED THAT SUCH NOTIONAL INCOME CAN NEVER BE ACTUALLY APPLIED OR ACCUMULATED OR SET APART FOR THE PURPOSES OF TH E TRUST AND THE ASSESSEE TRUST WHILE BEING LIA BLE TO PAY INCOME-TAX ON ACCRUAL BASIS WILL NOT BE ABLE TO DERIVE THE BENEFIT CONFERRED BY THE S AID PROVISION. WE ARE THEREFORE OF THE VIEW THAT THE TRIBUNAL WAS RIGHT IN COMING TO THE CONCLUSION THAT THE INCOME DERIVED FROM TRUST PROPERTY MUST BE DETERMINED ON COMMERCIAL PRINCIPLES AND IN DOING SO ALL OUTGOINGS INCLUDING OUTGOING BY WAY OF INCOME-TAX PAID BY THE ASSESSEE TRUST MUST BE DEDUCTED AND IT IS ONLY FROM THE SURPLUS INCOME IN THE HANDS OF THE TRUSTEES THAT THE QUESTION OF APPLICATION OR ACCUMULATION OR SETTING APART OF INCOME CAN ARISE. IT WAS FURTHER HELD IN PARAGRAPH 41 THAT THE ASSESSEE TRUST WAS ENTITLED TO EXEMPTION U/S 11(1)(A) AND THAT ITS INCOME SHOULD BE DETERMINED AT RS. 2 170/-. IT MAY B E POINTED OUT THAT THE CASE OF THE LEARNED COUNSEL WAS THAT THIS ORDER OF THE TRIBUNAL SHOULD BE FOLLOWED BY US BEING T HE PRIOR DECISION OF THE BENCH OF SAME STRENGTH. WITH THESE REMARKS WE MAY PROCEED TO DECIDE VARIOUS GROUNDS (REVIS ED GROUNDS) TAKEN BY THE ASSESSEE IN THE APPEAL. WE MAY ADD HERE THAT IN VIEW OF VARIOUS CASES CITED BY THE LD. COUNSEL ON THE RULE OF CONSISTENCY AN ORDER CAN BE FOLL OWED TO THE EXTENT IT DEALS WITH THE CONTROVERSIES AT HAN D. IF CERTAIN PORTIONS RELATING TO THE CONTROVERSY ARE NOT DI SCUSSED AND DEBATED AT ALL THEN THERE WILL BE NO ORDER ON THOSE CONTROVERSIES WHICH COULD BE FOLLOWED BY US. 15 9. GROUND NO. 1 IS THAT THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE THE FACTS OF THE CASE AND MIS-D IRECTED HIMSELF IN OVER-LOOKING AND IGNORING THE FINDINGS RECORDE D BY THE ITAT IN THE ORDER FOR ASSESSMENT YEAR 1988-89. IT IS FURTHER MENTIONED THAT HE ERRED IN HOLDING THAT THA T ORDER WAS NOT APPLICABLE TO THIS YEAR IN SPITE OF THE FA CT THAT FACTUAL SITUATION IN THE TWO YEARS WAS IDENTICAL. THE FINDINGS OF THE LEARNED CIT(A) IN THIS RESPECT ARE CONTAINED I N PARAGRAPH 29 OF HIS ORDER WHICH IS REPRODUCED FOR THE S AKE OF READY REFERENCE - THE LD. MEMBERS OF THE ITAT WHILE DISPOSING OF APPEAL FOR A.Y. 1988-89 HAS SIMPLY RELIED ON THE FACTS THAT THE TRUST HAS BEEN RECOGNIZED CHARITABLE IN T HE PAST RELYING ON THE AIMS AND OBJECTS OF THE TRUST AN D CERTAIN DECISIONS. HOWEVER I HAVE ALREADY POINTED OUT THAT THE CASE OF EACH AND EVERY YEAR IS DIFFERENT AND THE TAXABILITY OR EXEMPTION OF RECEIPT IN A YEAR DEPENDS UPON TH E ACTIVITIES OF THE TRUST/SOCIETY. THE APPELLANT HAS ALSO CON TRAVENED PROVISION OF SECTION 13(1)(C)(II) READ WITH 1 3(2)(B) AND 13(3)(A) AND (EE) OF THE INCOME-TAX ACT. WE HA VE PERUSED THE OBJECTS OF THE TRUST AS WELL AS THE ORDER OF THE HON'BLE ITAT FOR ASSESSMENT YEAR 1988-89. WE FIND THA T THE OBJECTS ARE RELIGIOUS OR CHARITABLE IN NATURE. THE TRU ST HAS ALSO BEEN REGISTERED U/S 12-A OF THE ACT. THE HON'B LE TRIBUNAL HAS GIVEN A FINDING THAT MERE FAILURE TO PROD UCE THE BOOKS OR NOT ENTERING INCOME AND EXPENDITURE RE LATING TO PROVIDING FOOD IN THE BOOKS DO NOT COME IN THE WAY OF THE FINDING THAT THE ASSESSEE IS A RELIGIOUS-CUM-CHA RITABLE TRUST. WE DO NOT FIND ANY COMPELLING REASON TO DIGRES S FROM THIS FINDING AND THEREFORE HOLD THAT THE ASSESSEE IS A RELIGIOUS- CUM-CHARITABLE TRUST. THUS GROUND NO. 1 IS DISP OSED OFF BY HOLDING THAT THE ASSESSEE IS A RELIGIOUS AND C HARITABLE TRUST AND THAT THE LD. CIT(A) OUGHT TO HAVE HELD THE TRUST TO BE A RELIGIOUS & CHARITABLE TRUST. 9.1 THE SECOND GROUND IS THAT THE LEARNED CIT( APPEALS) ERRED IN HOLDING THAT THE TRUST WAS NOT VALIDL Y CREATED AND IT WAS NOT A GENUINE TRUST IN COMPLETE DISREGARD OF THE FACT THAT THE TRUST WAS REGISTERED U/S 12-A OF THE INCOME-TAX ACT. THE FINDING OF THE LEARNED CIT(A) WAS THAT THE QUESTION WHETHER UNDER A DOCUMENT THE ASSESSEE IS OR IS NOT A TRUST 16 IS ALWAYS A QUESTION OF CONSTRUCTION OF THE DO CUMENT AND A QUESTION OF CONSTRUCTION OF DOCUMENT IS ALWAYS A QUESTION OF LAW. IT HAS ALREADY BEEN POINTED OUT THAT TH E TRUST IS VIRTUALLY ONE MAN SHOW AND CONTROLLED BY SHRI CHANDRASWAMI. IT CANNOT BE A PUBLIC CHARITABL E TRUST MERELY BECAUSE IT IS EVIDENCED BY A DEED. IT HAS ALSO BEEN HELD IN FIFTH GENERAL EDUCATION SOCIETY VS. CIT (19 90) 185 ITR 634 (ALL.) THAT AT THE STAGE OF REGISTRAT ION U/S12-A THE COMMISSIONER IS NOT TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLI CATION IS MADE IN ACCORDANCE WITH REQUIREMENTS U/S 12-A READ W ITH RULE 17- A AND WHETHER FORM NO. 10A HAS BEEN PROPERLY FI LED. HE MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. THEREAFTER HE CITED CERTAIN CASES I NCLUDING THE CASE OF MUNICIPAL CORPORATION OF DELHI VS. CHILDREN BOOK TRUST AIR (1992) SC 1456 TO THE EFFECT THAT THE ELEMENT OF PUBLIC BENEFIT OR PHILANTHROPY HAS TO BE PRESEN T IN ORDER TO HOLD A TRUST TO BE EXISTING FOR CHARITABLE PURPOSES. THESE CONDITIONS ARE NOT FULFILLED BY THE TRUST. HAV ING CONSIDERED THE FINDING OF THE LEARNED CIT(A) WE FIND TH AT THERE IS AN INHERENT CONTRADICTION WHEN IT IS STATED THAT THE COMMISSIONER CAN ONLY EXAMINE WHETHER THE FORM ALITIES HAVE BEEN COMPLETED OR NOT AND AT THE SAME TIM E IT IS STATED THAT HE MAY ALSO EXAMINE WHETHER OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. THE EXAMINATION OF OBJ ECTS IS NOT AN EMPTY FORMALITY AS THE REGISTRATION IS CRUCIAL LY DEPENDENT UPON THE OBJECTS OF THE TRUST AND GENUINENESS OF ITS ACTIVITIES. ONCE IT IS FOUND THAT OBJECTS ARE CHARITABLE AND ACTIVITIES ARE GENUINE THEN REGISTRATION HAS TO BE GRAN TED. THUS IT FOLLOWS THAT IF REGISTRATION IS GRANTED THEN THE ASSESSEE IS A CHARITABLE OR RELIGIOUS TRUST. IT IS ANOTHE R MATTER THAT IN SPITE OF BEING SO IT MAY NOT BE ENTITLED TO E XEMPTION U/S 11 FOR THE REASON THAT ITS INCOME HAS NOT BEEN AP PLIED WHOLLY OR PARTLY FOR RELIGIOUS OR CHARITABLE PURPOSES. HOWEVER AFTER REGISTRATION THERE CANNOT BE A CASE OF THE REVENUE THAT THE TRUST WAS NOT RELIGIOUS AND CHARITABLE T RUST TILL SUCH TIME THE REGISTRATION WAS WITHDRAWN. THE REG ISTRATION HAS NOT BEEN WITHDRAWN IN THIS CASE. THEREFORE WE ARE OF THE VIEW THAT THE TRUST IS A GENUINE TRUST DULY REGISTERED U/S 12-A OF THE ACT. THUS THIS GROUND IS ALSO ALLO WED. 17 9.2 GROUND NO. 3 IS AGAINST THE FINDING THAT NO CHARITABLE ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE T RUST. GROUND NO. 4 IS AGAINST THE FINDING THAT THE ASSESSEE V IOLATED THE PROVISIONS CONTAINED IN SECTIONS 13(1)(C)(II) AN D 13(2)(B) ETC. IN THIS CONNECTION THE FINDINGS OF THE LEARNED CIT(APPEALS) CONTAINED ON PAGE 12 ARE REPRODUCED BELOW:- OUT OF RECEIPT OF RS. 2 53 104/- IN A.Y. 1989-9 0 THE TOTAL EXPENDITURE ON RENT ITSELF WAS RS. 1 89 000/- AND INTEREST WAS RS. 1 38 441/-. OTHER EXPENDITURE INCLUDED PRINT ING AND STATIONERY RS. 248/- POSTAGE AND TELEGRAM RS. 10 6/- GENERAL EXPENDITURE RS. 187/-. HENCE NO EXPENDITURE WAS INCURRED ON CHARITABLE PURPOSES DURING THIS YEAR. 9.3 THE POSITION STATED BY THE LEARNED CIT(A) IN RESPECT OF RECEIPT AND EXPENDITURE IS FACTUALLY CORRE CT. THE QUESTION IS WHETHER RENT AND INTEREST OF RS. 1 89 000/- AND RS. 1 38 441/- REPRESENTED APPLICATION OF INCOME FOR CHARITABLE OBJECTS? IT IS SEEN FROM THE STAT EMENT OF SHRI VALLABH VYAS WHICH HAS BEEN RELIED UPON IN TH E ORDER OF THE ITAT FOR ASSESSMENT YEAR 1988-89 THAT THE PREMISES WERE INTER-ALIA USED AS A RESIDENCE OF SHRI CHAN DRASWAMI AND AS A GUEST HOUSE FOR HIS DISCIPLES. THE PR EMISES DID NOT HAVE ANY OFFICE AND THE BOOKS WERE NOT THERE. SHRI CHANDRASWAMI WAS OCCUPYING ROOM NO. 8. THE AF FAIRS OF THE GUEST HOUSE WERE MANAGED THROUGH CONTRIBUT IONS AND OFFERINGS IN THE TEMPLE LOCATED IN ROOM NO. 7. IT TRANSPIRES FROM THIS STATEMENT THAT THERE WAS A TEMPLE IN THE BUILDING AND OFFERINGS WERE MADE IN THE TEMPLE WHICH WERE USED TO MANAGE THE AFFAIRS OF THE GUEST HOUSE. THE HON 'BLE TRIBUNAL HAS GIVEN A FINDING THAT NON-ACCOUNTING OF INCOME AND EXPENDITURE OF THE TEMPLE AND THE GUEST HOUSE IS ONLY AN IRREGULARITY NOT FATAL TO THE PREPOSITION THA T THE ASSESSEE WAS A RELIGIOUS AND CHARITABLE TRUST. WE DO NOT FIND ANY REASON TO DIGRESS FROM THIS FINDING. IT WAS ALS O HELD THAT ACCOMMODATING DISCIPLES WAS IN THE NATURE OF MA INTAINING A SARAI FOR THE PILGRIMS. IN THESE CIRCUMSTANCES THE QUESTION IS WHETHER THE ASSESSEE LOOSES EXEMPTION IN RE SPECT OF EXPENDITURE BY WAY OF RENT AND INTEREST U/S 1 1(1)(A) AS 18 APPLICATION OF INCOME FOR RELIGIOUS AND CHARITAB LE PURPOSES IN VIEW OF THE FACT THAT A ROOM IN BUILDING WAS USED AS A RESIDENCE OF SHRI CHANDRASWAMI A PROHIBITED PERS ON? THE HON'BLE TRIBUNAL MENTIONED THAT THE EXPENDITURE TOWARDS RENT AND INTEREST AND OTHER ADMINISTRATIVE EXP ENSES WERE TO BE CONSIDERED AS APPLICATION OF INCOME. IN CO MING TO THIS CONCLUSION THE APPLICABILITY OF SECTION 13 WAS NOT CONSIDERED AND CONSEQUENTLY THE IMPORT OF ANSW ERS TO QUESTION NOS. 6 7 AND 20 OF THE STATEMENT OF SH RI VALLABH VYAS WAS NOT TAKEN INTO ACCOUNT. IT WAS ALS O NOT CANVASSED BY THE REVENUE. SINCE THE STATEMENT HAS BEEN RELIED UPON IN EARLIER YEAR IN FAVOUR OF THE ASSESSEE WE DO NOT SEE WHY THESE PORTIONS OF THE STATEMENT SHOULD ALSO NOT BE TAKEN AS CORRECT. THUS WE HOLD THAT ON THESE ISSUES STATEMENT OF SHRI VALLAH VYAS IS CORRECT AND SUB SEQUENT STATEMENTS OF SHRI K.N. AGGARWAL CANNOT BE RELIE D UPON. THE STATEMENT SHOWS THAT THE BUILDING WAS USED AS RESIDENCE OF SHRI CHANDRASWAMI AND ONE ROOM NO. 8 WAS KEPT EXCLUSIVELY FOR SHRI CHANDRASWAMI THE LIFE- TR USTEE. THE CASE OF THE LEARNED COUNSEL IS THAT THE DISCIPLES CONSIDERED SHRI CHANDRASWAMI TO BE A GOD AND THEREFORE RES ERVATION OF A ROOM FOR HIM IN THE BUILDING SHOULD BE TAKEN AS USER OF THE PROPERTY OF THE TRUST FOR THE OBJECTS OF THE TRUST. LOOKING TO STATEMENT OF SHRI VALLABH VYAS ORDER OF THE ITAT IN A.Y. 1988-89 AND THE FACT THAT ON THE DATE OF SEARCH KEYS OF THE ROOM HAS TO BE BROUGHT FROM CHANDRA SWAM Y WE ARE UNABLE TO AGREE WITH THIS ARGUMENT AS IT IS NOT A CASE WHERE A ROOM IN THE BUILDING WAS MADE AVAILAB LE TO SHRI CHANDRASWAMI AS AND WHEN HE CAME TO DELHI. IT IS A CASE OF RESERVING ROOM NO. 8 PERMANENTLY FOR HIM. 9.4 TWO ISSUES ARISE FOR CONSIDERATION IN THIS M ATTER. THE FIRST ONE IS WHETHER PAYMENT OF RENT AND IN TEREST WAS EXPENDITURE LIABLE TO BE DEDUCTED FROM RECEIPT S TO ARRIVE AT THE INCOME OR IT IS APPLICATION OF INCOME U/S 11( 1)(A)? THE ORDER OF THE TRIBUNAL WAS THAT IT WAS APPLICAT ION OF INCOME. HOWEVER IN THE IMMEDIATELY PRECEDING PARAGRAP H NO. 26 THE TRIBUNAL HAD EXTRACTED CERTAIN PORTION FRO M THE DECISION OF HON'BLE GUJARAT HIGH COURT THE E FFECT OF WHICH IS THAT SUCH EXPENSES ARE OUTGOINGS WHICH HAV E TO BE 19 DEDUCTED IN ARRIVING AT SURPLUS AVAILABLE FOR APPLICATION TOWARDS THE OBJECTS. THEREFORE THE REAL QUEST ION HERE IS NOT THE APPLICABILITY OF SECTION 11 BUT DEDUCTIBIL ITY OF THE EXPENDITURE FOR ARRIVING AT COMMERCIAL PROFITS. HAVING REGARD TO THE FACT THAT ONE ROOM WAS RESERVED FOR THE LIFE TRUSTEE A PROHIBITED PERSON U/S 13(3)(CC) WE ARE OF THE VIEW THAT EXPENDITURE RELATED TO THE ACCOMMO DATION PROVIDED TO HIM IS NOT DEDUCTIBLE IN ARRIVING AT THE SURPLUS INCOME. AS THE INTEREST WAS ALSO PAID IN ORDER TO TAKE THE PREMISES ON RENT SIMILAR CONSIDERATION WOULD APPLY TO THE DEDUCTIBILITY OF INTEREST. THE NON-DEDUCTIBLE P ORTION MAY BE WORKED OUT ON THE BASIS OF AREA OF THE ROOM TO THE TOTAL AREA OF THE BUILDING. IN SO FAR AS ACCOMMODATING OF THE DISCIPLES IS CONCERNED THE WORD DISCIPLES IS RATHER TOO LOOSE A WORD WHICH DOES NOT SPECIFICALLY POI NTS TOWARDS A PERSON. THE DECISION IN THE CASE OF KAMLA TOW N TRUST (SUPRA) GOES AGAINST THE REVENUE. THE TRIBUNAL HAD ALSO HELD THAT PROVIDING ACCOMMODATION WAS IN THE NATURE OF MAINTAINING A SARAI BEING ONE OF THE OBJECTS. THEREFORE NO ADVERSE INFERENCE CAN BE DRAWN IN THIS MAT TER. 9.5 THE SECOND ISSUE IS WHETHER THE TRUST LOO SES THE EXEMPTION U/S 11(1)(A) IN VIEW OF THE FACT THA T ONE ROOM WAS USED BY SHRI CHANDRASWAMI. EVEN IF HE WAS CONSIDERED TO BE THE GOD BY HIS DISCIPLES THE FACT REMAINS THAT HE WAS A HUMANIFORM GOD I.E. A HUMAN BEING. HE WAS THE LIFE-TRUSTEE OF THE TRUST. LIKE ALL HUMAN BEINGS HE WAS REQUIRED TO BE ACCOMMODATED AND THE TRUST ALLOTTED HIM ROOM NO. 8 FOR HIS USE. THUS TH IS PART OF THE PROPERTY OF THE TRUST WAS USED DIRECTLY FOR HI S BENEFIT WITHOUT CHARGING AN COMPENSATION WHICH LEADS TO A CLEAR INFERENCE OF INFRINGEMENT OF SECTION 13(1)(C)(II) READ WITH SECTION 13(3)(CC) AND SECTION 13(2)(B) READ WI TH SECTION 13(3)(CC). THIS ISSUE WAS NOT AGITATED OR CON SIDERED AT ALL IN THE ORDER OF THE APPELLATE TRIBUNAL FOR ASSES SMENT YEAR 1988-89 OR IN THE ORDERS OF LOWER AUTHORITIES. T HEREFORE THE ORDER REGARDING EXEMPTION U/S11(1)(A) IS PER CUR IUM TO THIS EXTENT. HAVING CONSIDERED ARGUMENTS OF BOTH PARTIES WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTIT LED TO EXEMPTION OF ITS INCOME U/S 11(1)(A) OF THE ACT NOTWITHSTA NDING THE FACT 20 THAT IT IS A RELIGIOUS AND CHARITABLE TRUS T. THUS GROUND NOS. 3 AND 4 ARE DISMISSED AS DISCUSSED ABOVE. 9.6 GROUND NO. 5 IS AGAINST THE FINDING THAT CON DITIONS FOR REGISTRATION U/S 12-A(B) WERE NOT SATISFIED. W E HAVE SEEN THAT THE ASSESSEE WAS VALIDLY REGISTERED UND ER SECTION 12- A ACCOUNTS WERE AUDITED AND REPORT OF THE AC COUNTANT WAS FILED. THEREFORE FOLLOWING THE ORDER OF EARL IER YEAR THIS GROUND IS ALLOWED. 9.7 GROUND NO. 6 IS AGAINST THE ADVERSE OBSERV ATIONS MADE AT PARAGRAPHS 29 TO 32 OF THE APPELLATE OR DER AND IT WAS STATED THAT NO OPPORTUNITY WAS GRANTED TO THE ASSESSEE TO REBUT THE STATEMENT MADE THEREIN. THE CONTEN TS OF PARAGRAPHS 29 AND 30 HAVE BEEN CONSIDERED BY US ALREADY TO THE EXTENT THEY ARE APPLICABLE TO ASSESSM ENT YEAR 1989- 90. PARAGRAPHS 31 AND 32 OF THE ORDER OF THE LE ARNED CIT(A) ARE REPRODUCED BELOW FOR READY REFERENCE:- 31. WHILE MONITORING THE ST. KITTS CASE THE HON'BLE JUDGES OF THE SUPREME COURT JUSTICE J.S. VERMA AS HE THEN WAS AND JUSTICE B.N. KRIPAL EXPRESSED THEIR CONCERN OVER HUGE AMOUNTS OF DONATION RECEIVED BY SHRI CHANDRASWAMIS TRUST THE APPELLANT. FOREIGN DONATIONS RECEIV ED BY THE TRUST PURPORTED TO HAVE BEEN SET UP FO R RELIGIOUS AND CHARITABLE PURPOSES HAVE ACTUALLY NOT BEING ACTUATED BY PHILANTHROPY. RAMIFICATION OF DONATIONS HAVE ACTUALLY CROSSED THE NATIONAL BORDERS. SHRI CHANDRASWAMI HAS GONE ABROAD OVER MORE THAN 300 TIMES AND MUST HAVE SPENT A MIND BOGGING AMOUNT ON THESE VISITS. THE CONNECTION OF SHRI CHANDRASWAMI AND THE TRUST WITH A NUMBER OF SUSPICIOUS CHARACTERS INCLUDING ARMS DEALER ADNAN KHASHOGGI AND LTTE CADRES ARE NOT WELL KNOWN AND ESTABLISHED. THE CONTENTION OF THE APPELLANT TRUST THAT THE FOREIGN DONATIONS HAVE BEEN RECEIVED MOSTLY FROM DISCIPLES CONCEAL MORE FACTS THAN THEY REVEAL. A RELIGIOUS AND CHARITABLE TRUST CANNOT SEEK THE SHELTER OF 21 IMMUNITY IF THE DONORS THEMSELVES ARE UNDER A STREAK OF SUSPICION. HOW MANY PEOPLE IN THIS WORLD GIVE MONEY FOR NOTHING? HUGE AMOUNTS GIVEN ARE NOT MERE PHILANTHROPY. 32. THE REPORT OF WILLIAM CARRY WHO HEADED A US SENATE SUB-COMMITTEE TO PROVE THE BCCI BANK SCAM CONFIRMS THAT THE BANK HAD ACCOUNTS OF ARMS DEALERS ADNAN KHASHOGGI AND ERNIE MILLAR. BOTH ARE KNOWN DISCIPLES OF CHANDRASWAMI LIFE LONG TRUSTEE OF THE APPELLAN T TRUST. THE CARRY REPORT ALSO NOTES THAT 84 MILLI ON $US WAS TRANSFERRED TO THE LTTE FROM THESE ACCOUNTS. CARRY ALSO SAYS THAT THE MONEY WAS USED FOR THE RAJIV GANDHI ASSASSINATION. NATURALLY DONATIONS FROM SUCH PERSONS CAN BE FOR ANY OTHER PURPOSE BUT THEY CANNOT BE FOR CHARITABLE AND RELIGIOUS PURPOSES. SHRI CHANDRASWAMI AND HIS TRUST HAS USED ALL THES E UNACCOUNTED FOREIGN MONEY RECEIVED FROM DUBIOUS AND SUSPICIOUS CONCERNS FOR LIVING IN GRAND STYLE IN A PALACIAL BUILDING NAMED AS ASHRAM DRIVING FOREIGN CARS FLYING IN INDIA AN D IN FOREIGN COUNTRIES ENTERTAINING HIS DISCIPLE S AND GUESTS- ALL IN THE NAME OF THE APPELLANT TRU ST. CAN SUCH A TRUST BE CALLED TO HAVE BEEN SET U P FOR RELIGIOUS AND CHARITABLE PURPOSES? THE ABOVE DISCUSSION OF THE FACTS OF THE CASE PROV E THAT THE OSTENSIBLE PURPOSES FOR WHICH THE APPELLANT TRUST WAS CREATED AND FOR WHICH DONATIONS WERE COLLECTED AND INCOMES WERE EARNED ARE NOT THE REAL ONES. WE FIND THAT NO MATERIAL EXISTS ON RECORD TO E STABLISH THE FACTS NARRATED IN THE AFORESAID PARAGRAPHS. THE LEARNED DR ALSO DID NOT MAKE ANY ARGUMENTS IN THIS BEHALF. THE FACTS DO NOT SEEM TO PERTAIN TO THIS YEAR AS NO FO REIGN DONATION HAS BEEN RECEIVED. THEREFORE WE ARE OF THE VIEW THAT OBSERVATIONS HAVE NO REPERCUSSION ON OUR EARL IER FINDINGS ESPECIALLY WHEN THE REVENUE HAS NOT EVEN WITH DRAWN 22 REGISTRATION OF THE TRUST. THUS THIS GROUND IS ALLOWED IN THE MANNER AS DISCUSSED ABOVE. 9.8 GROUND NO.7 IS AGAINST TAXATION OF THE GR OSS RECEIPTS WITHOUT ALLOWING EXPENDITURE. WE HAVE ALREADY HELD THAT THE ASSESSEE IS A CHARITABLE AND RELIGIOUS TR UST. IT NOT ENTITLED TO DEDUCTION OF RENT AND INTEREST IN RE SPECT OF ROOM NO. 8 ON A PRO-RATA BASIS. THE ASSESSING OFFICER IS ALSO DIRECTED TO ALLOW OTHER ADMINISTRATIVE EXPENSE S AS OUTGOINGS INCURRED FOR THE PURPOSE OF KEEPING TH E TRUST IN EXISTENCE. HOWEVER THE TRUST IS NOT ENTITLED TO EXEMPTION U/S 11(1)(A). THUS THIS GROUND IS PARTLY ALLO WED. 9.9 IN THE RESULT THE APPEAL IS PARTLY ALLOWED. 50. IN THE LIGHT OF THE VIEW TAKEN BY THE TRIBUNAL IN A.Y. 1989-90 THE TRIBUNAL DECIDED THE APPEALS OF OTHER YEARS I. E. A.Y. 1990-91 TO 1993-94 AS UNDER:- A.Y. 1990-91 : 10.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. THE FACTS ARE SIMILAR TO THE FACTS FOR ASSESSMENT YEAR 1989-90. RELYING ON THE ARGUME NTS FURNISHED IN THAT ORDER VARIOUS GROUNDS (IN THE REVISED GROUNDS) ARE DECIDED AS UNDER: GROUND NOS. 1 AND 2 ARE IDENTICAL TO THE EFFEC T THAT THE LEARNED CIT(A) IGNORED THE FINDINGS OF HON'BLE ITAT GIVEN IN THE ORDER FOR ASSESSMENT YEAR 1988-89 AND TH AT HE ERRED IN DRAWING A CONCLUSION THAT THE TRUST WAS NOT GENUINE IN SPITE OF THE FACT THAT IT WAS REGISTERED U/S 12-A OF THE ACT. FOLLOWING OUR FINDING IN THE ORDER FOR ASSESSME NT YEAR 1989-90 THESE GROUNDS ARE ALLOWED. 10.4 GROUND NO. 3 IS AGAINST THE FINDING THAT N O CHARITABLE ACTIVITY WAS CARRIED OUT BY THE ASSESSEE. WE HAVE ALREADY SEEN THAT IN THIS YEAR A SUM OF RS. 39 230/- W AS APPLIED TOWARDS CHARITABLE OBJECTS. THE ONLY CASE MADE OUT BY THE 23 LEARNED DR WAS THAT RECEIPTS FOR THE SCHOLARS HIPS WERE NOT PRODUCED. ON REFERRING TO PAGES 41 TO 44 I T IS SEEN THAT THESE PAGES ARE NOTHING BUT RECEIPTS FOR SCHOLA RSHIPS. THE OTHER GROUND WAS THAT THE SCHOLARSHIP WAS GIV EN TO THE CHILDREN OF ONE FAMILY ONLY. THERE IS NO EVID ENCE ON RECORD THAT THE CHILDREN FALL IN THE CATEGORY OF PRO HIBITED PERSON U/S 13. THAT BEING SO GRANT OF SCHOLARSHIP T O CHILDREN OF ONE FAMILY DOES NOT COME IN THE WAY OF HOLDIN G THAT IT WAS CHARITABLE EXPENDITURE. THEREFORE WE ARE OF TH E VIEW THAT A SUM OF RS. 39 230/- REPRESENTED EXPENDITURE INCUR RED IN PURSUANCE TO THE OBJECTS OF THE TRUST. 10.5 GROUND NO. 4 IS THAT THE LEARNED CIT(APPEALS) CAME TO A WRONG CONCLUSION THAT THERE WAS VIOLATION OF VARIOUS PROVISIONS CONTAINED IN SECTION 13 OF THE ACT. I N OUR ORDER FOR ASSESSMENT YEAR 1989-90 IT HAS ALREADY B EEN HELD THAT RESERVING A ROOM PERMANENTLY FOR SHRI CHANDRASWA MI AMOUNTED TO APPLICATION OF THE TRUST PROPERTY F OR THE BENEFIT OF A PROHIBITED PERSON. FOLLOWING THAT ORDER IT IS HELD THAT THE CASE IS HIT BY THE PROVISIONS CONTAINED IN SECTION 13 AND THE TRUST IS NOT ENTITLED TO EXEMPTION UNDE R SECTIONS 11 AND 12 OF THE ACT. 10.6 GROUND NO. 5 IS AGAINST THE FINDING THAT TH E ASSESSEE DOES NOT SATISFY THE CONDITIONS MENTIONED IN SECTION 12- A(B) OF THE ACT. WE HAVE ALREADY GIVEN A FIND ING THAT SINCE THE TRUST IS REGISTERED BY THE COMMISSIONER AN D SUCH REGISTRATION HAS NOT BEEN WITHDRAWN. THE CONDI TIONS MENTIONED IN SECTION 12A(B) HAVE ALSO BEEN SA TISFIED. THEREFORE IT IS HELD THAT THE LEARNED CIT(APPE ALS) ERRED IN GIVING A FINDING THAT THE ASSESSEE TRUST DOES NOT SATISFY THE CONDITIONS LAID DOWN IN SECTION 12-A(B) OF THE AC T. 10.7 GROUND NO. 6 IS AGAINST OBSERVATIONS OF THE LEARNED CIT(APPEALS) IN PARAGRAPHS 29 TO 32. WE HAVE AL READY HELD THAT OBSERVATIONS IN PARAGRAPHS 31 AND 32 DO NOT HAVE ANY REPERCUSSION ON ASSESSMENT OF THE TRUST FOR A.Y. 1989-90. THERE IS NO FOREIGN DONATION IN THIS YEAR. TH EREFORE THE FACTS REMAIN THE SAME. THEREFORE THIS GRO UND IS ALLOWED. 24 10.8 GROUND NO.7 IS AGAINST BRINGING THE GROSS RECEIPT TO TAX. WE HAVE SEEN THAT THE ASSESSEE HAD IN CURRED ADMINISTRATIVE EXPENSES WHICH WERE NECESSARY F OR KEEPING THE TRUST GOING. THESE EXPENSES UNDER THE HEA D SALARY AND WAGES POSTAGE AND TELEGRAM AUDIT FEES AND TR AVELING EXPENSES DO NOT REALLY AMOUNT TO APPLICATION OF INCOME BUT REPRESENT EXPENDITURE INCURRED FOR KEEPING THE T RUST AFLOAT. THEREFORE THESE EXPENDITURES WILL BE DEDUCTIBL E IN COMPUTING THE INCOME AVAILABLE FOR APPLICATION U/S 11(1)(A). THE RENT AND INTEREST EXPENDITURE WAS INTER- ALIA INCURRED FOR THE PURPOSE OF THE TRUST AND FOR HOUSING SHRI CHANDRASWAMI. THIS EXPENDITURE WILL BE DEDUCT ED ON PRO- RATA BASIS. HOWEVER THE ASSESSEE IS NOT ENTI TLED TO EXEMPTION U/S 11(1)(A). THUS THIS GROUND IS PARTLY ALLOWED. 10.9 IN THE RESULT THE APPEAL IS PARTLY ALLOWED. A.Y. 1991-92: 11.4 WE HAVE CONSIDERED THE FACTS OF THE CAS E AND RIVAL SUBMISSIONS. WE FIND THAT THE FACTS ARE SIMIL AR TO THE FACTS OF EARLIER YEARS. THE ASSESSEE HAS INCURRED EXP ENDITURE IN PURSUANCE TO THE OBJECTS AMOUNTING TO RS. 41 640/- . IN VIEW OF OUR ORDER FOR ASSESSMENT YEAR 1989-90 IT IS HELD THAT A PART OF THE PROPERTY HELD UNDER TRUST BY THE A SSESSEE WAS PARTLY USED BY SHRI CHANDRASWAMY. THEREFORE R ENT AND INTEREST CAN BE ALLOWED ONLY ON PRO-RATA BASIS . SINCE THE PROPERTY WAS USED BY A PROHIBITED PERSON THE CASE IS COVERED U/S 13 OF THE ACT. THUS THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11. THE ASSESSEE HAS TAKEN UP SEVEN GROUNDS IN THE REVISED GROUNDS WHICH ARE IDEN TICAL WITH THE GROUNDS TAKEN IN ASSESSMENT YEARS 1989-90 AND 1990-91. THEREFORE RELYING ON EARLIER ORDERS THE APPEA L IS PARTLY ALLOWED A.Y. 1992-93: 12.4 WE HAVE CONSIDERED THE FACTS OF THE CAS E AND RIVAL SUBMISSIONS. WE FIND THAT THE AUDITORS HAD MAD E A REMARK 25 IN THE INCOME AND EXPENDITURE ACCOUNT THAT VOLU NTARY DONATIONS INCLUDED A SUM OF RS. 10.00 LAKH TOWA RDS CORPUS. THIS ISSUE WAS RAISED BY THE ASSESSING OFFICER WITH THE ASSESSEE AND IT WAS EXPLAINED THAT TWO CHEQUES DATED 11.2.1992 DRAWN ON BANK OF BARODA NEW DELHI O VERSEAS BENCH WERE RECEIVED. IT WAS ALSO MENTION ED THAT PHOTOCOPIES OF THESE CHEQUES ARE PRODUCED. BEYO ND THIS NO OTHER EVIDENCE WAS FILED BEFORE THE ASSESSING OFFICER AS SEEN FROM PAGES 73 TO 76 OF THE PAPER BOOK NO. III. ON CONSIDERATION OF FACTS OF THIS YEAR AND EARLIER YEARS IT IS SEEN THAT THE ONLY DISTINCTION IS THAT THE CO RPUS DONATION OF RS. 10.00 LAKH WAS STATED TO HAVE BEEN RECEIVE D IN THIS YEAR FOR THE FIRST TIME BUT EVIDENCE OF DONATION OR THAT IT WAS TOWARDS CORPUS WAS NOT PRODUCED BEFORE ANY OF THE AUTHORITIES BELOW OR BEFORE US. THEREFORE IT I S HELD THAT THERE IS NO EVIDENCE THAT THE IMPUGNED RECEI PT WAS DONATION OR THAT IT WAS TOWARDS THE CORPUS. T HEREFORE THIS RECEIPT CONSTITUTES THE INCOME OF THE ASSESSEE EITHER AS UNEXPLAINED CREDIT OR DONATION. COMPLETE FAILUR E OF THE ASSESSEE TO DISCLOSE THE SOURCE OF RECEIPT LEN DS SOME CREDENCE TO THE REMARKS MADE BY HIM IN PARAGRA PH 31 THAT THE CHARACTER OF THE RECEIPTS IS SUSPICIOUS. NO NETHELESS THE ONLY CONCLUSION THAT CAN BE DRAWN FOR TAX PURPOSES IS THAT THE RECEIPT IS INCOME AND THERE IS NO EVI DENCE THAT IT IS TOWARDS THE CORPUS. SUBJECT TO THESE REMARKS A ND RELYING ON ORDERS OF EARLIER YEARS IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT RENT AND INTEREST EXPENDIT URE ON PRO-RATA BASIS AND IT IS NOT ENTITLED TO EXEMPTION U/S 11(1)(A) AS THE PROPERTY OF THE TRUST HAS BEEN USED BY A PROH IBITED PERSON. 12.5 THE ASSESSEE HAS TAKEN UP SEVEN GROUNDS IN THE REVISED GROUNDS OF APPEAL WHICH ARE IDENTICAL WITH THE GROUNDS OF EARLIER YEARS. SUBJECT TO THE REMA RK THAT THE DONATION OF RS. 10.00 LAKH IS THE INCOME OF THE ASSESSEE THE ORDERS OF EARLIER YEARS ARE MADE APPLICABLE T O THIS YEAR ALSO IN RESPECT OF EACH GROUND OF APPEAL. THU S THE APPEAL IS PARTLY ALLOWED. A.Y. 1993-94: 26 13.4 WE HAVE CONSIDERED THE FACTS OF THE CA SE AND RIVAL SUBMISSIONS. ON PERUSAL OF INCOME AND EXPEN DITURE ACCOUNT IT IS SEEN THAT THE ASSESSEE HAD DEBIT ED AN AMOUNT OF RS. 51 089/- AS CHARITY EXPENDITURE. THE BR EAK-UP OF THE EXPENDITURE IS NOT FURNISHED IN THE PAPER BOOK FILED BEFORE US. THE PAPER BOOK NO. III FROM PAGES 77 TO 83 CONTAINS LETTERS DATED 10.10.1995 23.2.1996 AND 26.2.199 6 ADDRESSED TO THE ASSESSING OFFICER WITHOUT ANY ENCLOSURE. IN LETTER DATED 10.10.1995 IT WAS POINTED OUT THAT THE EXPENDITURE OF RS. 51 090/- WAS INCURRED TOWARDS PAYMENT OF SCH OLARSHIPS TO NEEDY STUDENTS FOOD FOR POOR AND FINANCIAL HE LP TO SANTANVANI . THE DETAILS WERE STATED TO HAVE BEEN ENCLOSED WITH THE LETTER BUT NOT ENCLOSED IN THE PAPE R BOOK. IN LETTER DATED 26.2.1996 IT WAS MENTIONED THAT DONATION OF RS. 10.00 LAKH WAS RECEIVED TOWARDS CORPUS. ANOTHER DONATION OF RS. 10.00 LAKH WAS RECEIVED IN THE IMMEDIATELY PRECEDING YEAR WHICH WAS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT OF THAT YEAR. HOWEVER TH E BOOK ENTRIES TO THIS EFFECT WERE PASSED IN THIS Y EAR. COPIES OF STATEMENT OF ACCOUNT AND COMPUTATION OF INCOME WE RE STATED TO BE ENCLOSED WITH THIS LETTER BUT NOT FILED IN THE PAPER BOOK. IT MAY HOWEVER BE MENTIONED THAT INCOME AND EXPENDITURE ACCOUNT AND BALANCE-SHEET OF THIS Y EAR WERE FILED IN PAPER BOOK NO. I TO WHICH WE HAVE AL READY REFERRED TO. ON THE BASIS OF THE AFORESAID IT W ILL BE SEEN THAT NO EVIDENCE WAS FILED REGARDING THE IDENTITY OF THE DONOR OR THE FACT THAT IT WAS TOWARDS THE CORPUS ALTHOUGH A NOTE TO THAT EFFECT WAS MADE IN THE BALANCE-SHEET. NO EVIDEN CE HAS BEEN FILED BEFORE US ABOUT THE IDENTITY OF THE DONO R OR THAT THE DONATION WAS TOWARDS THE CORPUS. AS MENTIONED EARLIER IN THE ORDER FOR ASSESSMENT YEAR 1992-93 THE FAILU RE OF THE ASSESSEE TO DISCLOSE COMPLETE DETAILS OF THE D ONATION LENDS SOME CREDENCE TO THE OBSERVATIONS MADE BY THE L D. CIT(A) IN PARAGRAPH 31 OF HIS ORDER. HOWEVER ON THE FACT S THE ONLY CONCLUSION THAT CAN BE DRAWN IS THAT THE IMPU GNED AMOUNT IS INCOME OF THE ASSESSEE EITHER AS AN EXPLAI NED CREDIT OR DONATION. IN THE ASSESSMENT ORDER IT WAS MEN TIONED THAT THE DETAILS OF EXPENDITURE INCURRED ON CONSTRUC TION OF BUILDING WERE NOT FILED. HOWEVER SUCH DETAIL S WERE PLACED IN PAPER BOOK NO. III AT PAGE 83. THE TOTAL OF THE 27 EXPENDITURE HAS NOT BEEN MADE BUT IT IS IN THE VICINITY OF RS. 20.86 LAKH. IN THE STATEMENT OF INCOME THE EX PENDITURE OF RS. 21 40 509/- WAS DEDUCTED IN THIS RESPECT AS APPLICATION OF INCOME. 13.5 APART FROM THE AFORESAID THE FACTS AR E SIMILAR TO THE FACTS OF EARLIER YEARS. IN THE EARLIER ORDERS WE HAVE HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT RENT AND INTEREST AS OUTGOING ONLY ON PRO-RATA BASIS AND IT IS NOT E NTITLED TO EXEMPTION U/S 11(1)(A) BECAUSE THE PROPERTY OF T HE ASSESSEE WAS USED BY A PROHIBITED PERSON. IT IS ALSO SEEN THAT IN THE REVISED GROUNDS THE ASSESSEE HAS TAKEN UP SEVEN GROUNDS WHICH ARE IDENTICAL TO THE GROUNDS OF EARLIER YEARS. SUBJECT TO THE AFORESAID REMARKS THE ORDERS OF EARLIER YEARS ARE MADE APPLICABLE TO GROUNDS FOR THIS YEAR ALSO IN RESPECT OF EACH GROUND. THUS THE APPEAL IS PA RTLY ALLOWED. 51. WHILE DECIDING THE APPEAL FOR A.Y. 1989-90 THE TRIBUNAL HAS NOTED THE FACT THAT (I) A SEARCH AND SEIZURE OPERAT ION WAS CONDUCTED ON OR ABOUT 23-2-1988; (II) STATEMENT OF SHRI VALLABH VYAS WAS RECORDED IN THE COURSE OF THAT SEARCH; (III) TRUST BUILDING SITUATED AT C-4/41 SAFDARJUNG DEVELOPMENT AREA NEW DELHI WAS A RESIDE NCE OF SHRI CHANDRA SWAMI AND WAS ALSO USED AS A GUEST HOUSE FO R HIS DISCIPLES; (IV) SHRI CHANDRA SWAMI WAS OCCUPYING ROOM NO.8. T HE TRIBUNAL HAD TAKEN NOTE OF THE DECISION OF THE TRIBUNAL PERT AINING TO THE A.Y. 1988-89 ON THE ISSUE WHETHER TRUST WAS ENTITLED TO EXEMPTION U/S 11 OF THE ACT. IN THE LIGHT OF THE TRIBUNALS ORDER FOR THE A.Y. 1988-89 THE TRIBUNAL IN SUBSEQUENT YEARS HAD TAKEN A VIEW THAT THE TRUST IN QUESTION IS A RELIGIOUS-CUM-CHARITABLE TRUST (REFER PARA 9 OF THE ORDER). ON THE BASIS OF THE FACT THAT THE TRUST PREMISES WE RE INTER-ALIA USED AS A RESIDENCE OF SHRI CHANDRA SWAMI AND AS A GUEST HO USE FOR HIS 28 DISCIPLES AND SHRI CHANDRA SWAMI WAS OCCUPYING ROO M NO.8 AND TAKING INTO ACCOUNT THE STATEMENT OF SHRI VALLABH V YAS THE TRIBUNAL HAD TAKEN A VIEW THAT THE TRUST PROPERTY WAS BEING USED BY PROHIBITED PERSONS U/S 13(3)(CC) OF THE ACT. THE TRIBUNAL THE N HELD THAT EXPENDITURE RELATED TO THE ACCOMMODATION PROVIDED T O SHRI CHANDRA SWAMI IS NOT DEDUCTIBLE IN ARRIVING AT THE SURPLUS INCOME OF THE TRUST. THE TRIBUNAL THEN DIRECTED THE A.O. TO DISALLOW PRO -RATA EXPENSES RELATING TO USE BY PROHIBITED PERSONS. THE TRIBUNA L ALSO HELD EXEMPTION U/S 11(1)(A) IS NOT AVAILABLE TO THE ASSE SSEE AS PORTION OF THE PROPERTY WAS USED DIRECTLY FOR BENEFIT OF SHRI CHANDRA SWAMI WITHOUT CHARGING ANY COMPENSATION WHICH LEADS TO A CLEAR INFERENCE OF INFRINGEMENT OF SECTION 13(1)(C)(II) READ WITH S ECTION 13(3)(CC) AND SECTION 13(2)(B) READ WITH SECTION 13(3)(CC). THE TRIBUNAL HELD THAT THOUGH THE ASSESSEE IS A CHARITABLE AND RELIGIOUS T RUST IT IS NOT ENTITLED TO DEDUCTION OF RENT AND INTEREST IN RESPECT OF ROO M NO.8 ON A PRO-RATA BASIS AND THE TRUST IS NOT ENTITLED TO EXEMPTION U/ S 11(1)(A) (REFER PARA 9.8 OF THE ORDER). 52. IN THE A.Y. 1990-91 THE TRIBUNAL HAS TAKEN AN IDENTICAL VIEW TO THAT OF A.Y. 1989-90. IN THE LIGHT OF THE ORDER OF THE TRIBUNAL FOR A.Y. 1988-89 THE TRIBUNAL HAD TAKEN A VIEW THAT THE CIT (A) ERRED IN DRAWING A CONCLUSION THAT THE TRUST WAS NOT GENUINE IN SPITE OF FACT THAT IT WAS REGISTERED U/S 12A OF THE ACT AND THER EFORE THE TRIBUNAL FOLLOWED ITS FINDING IN THE ORDER FOR ASSESSMENT YE AR 1989-90. FOLLOWING THE ORDER FOR ASSESSMENT YEAR 1989-90 TH E TRIBUNAL IN THE ASSESSMENT YEAR 1990-91 HELD THAT RESERVING A ROOM PERMANENTLY FOR SHRI CHANDRASWAMI AMOUNTED TO APPLICATION OF THE TR UST PROPERTY FOR THE BENEFIT OF A PROHIBITED PERSON AND THUS THE CASE IS HIT BY THE 29 PROVISIONS CONTAINED IN SECTION 13 AND THE TRUST IS NOT ENTITLED TO EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. 53. IN THE A.Y. 1991-92 THE VIEW TAKEN IN A.Y. 198 9-90 AND A.Y. 1990-91 HAS BEEN FOLLOWED IN THE LIGHT OF IDENTICAL FACTS INVOLVED. 54. IN THE A.Y. 1992-93 BESIDES THE VIEW TAKEN IN EARLIER YEARS THE TRIBUNAL HAD TAKEN A VIEW THAT THE RECEIPT OF DONAT IONS OF RS.10.00 LAKH THROUGH NRE ACCOUNT WHICH WAS CLAIMED BY THE ASSESSEE TRUST TO BE ON CORPUS ACCOUNT HAS BEEN HELD TO BE NOT ELIGI BLE FOR EXEMPTION IN THE ABSENCE OF EVIDENCE ESTABLISHING THAT THE AM OUNT WAS RECEIVED TOWARDS CORPUS ACCOUNT. THE RECEIPT OF RS.10 00 LA KH WAS HELD TO BE THE INCOME OF THE TRUST EITHER AS UNEXPLAINED CREDI T OR DONATION. THE TRIBUNAL FURTHER HELD THAT THE ASSESSEE WAS ENTITLE D TO DEDUCT RENT AND INTEREST EXPENDITURE ON PRO-RATA BASIS AND IT IS NO T ENTITLED TO EXEMPTION U/S 11(1)(A) AS THE PROPERTY OF THE TRUST WAS USED BY A PROHIBITED PERSON. 55. IDENTICAL VIEW BASED ON SAME SET OF FACTS WERE TAKEN IN A.Y. 1993-94. 56. FROM THE SAID ORDER OF THE TRIBUNAL IN THE CASE OF TRUST FOR THE A.Y. 1989-90 TO A.Y. 1993-94 IT IS CLEAR THAT THE FACT THAT PROPERTY OF THE TRUST WAS USED BY A PROHIBITED PERSON VIZ. SH RI CHANDRA SWAMI AND DONATION RECEIVED BY THE TRUST REMAINED UNEXPLA INED HAS BEEN CONSIDERED IN THE REGULAR ASSESSMENT OF THE TRUST. THUS THE SAME FACTS 30 ALREADY TAKEN INTO ACCOUNT WHILE MAKING REGULAR ASS ESSMENT OF EARLIER YEARS CANNOT BE MADE A BASIS TO DETERMINE UNDISCLOS ED INCOME IN THE BLOCK ASSESSMENT REQUIRED TO BE MADE U/S 158BC OF T HE ACT WITHIN THE MEANING OF CHAPTER XIV-B OF THE ACT. IN THE PRESEN T BLOCK ASSESSMENT THE A.O. HAS NOT BEEN ABLE TO POINT OUT ANY PIECE OF EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEA RCH CONDUCTED ON 1-11-1996 AND OTHER MATERIAL OR INFORMATION RELATAB LE TO SEIZED EVIDENCES TO ESTABLISH THAT THE DONATIONS/RECEIPTS REFLECTED IN THE BOOKS OF THE TRUST DURING VARIOUS YEARS WAS ACTUALL Y THE INCOME OF THE PRESENT ASSESSEE. THE SCOPE AND AMBIT OF BLOCK-ASS ESSMENT HAS ALREADY BEEN DISCUSSED EARLIER IN THIS ORDER. IN V IEW OF THE SCOPE AND AMBIT OF UNDISCLOSED INCOME TO BE DETERMINED IN THE BLOCK ASSESSMENT WITHIN THE MEANING OF CHAPTER XIV-B OF THE ACT AND IN THE ABSENCE OF ANY SEIZED MATERIAL FOUND DURING THE COURSE OF S EARCH CONDUCTED AGAINST THE ASSESSEE AND/OR THE TRUST AND THE DISCU SSION MADE ABOVE WE ARE OF THE CONSIDERED VIEW THAT THE RECEIPT SHOW N IN THE BOOKS OF THE TRUST DURING DIFFERENT YEARS CANNOT BE TREATED TO BE AN UNDISCLOSED INCOME OF THE PRESENT ASSESSEE TO BE INCLUDIBLE IN THE BLOCK ASSESSMENT MADE U/S 158BC WITHIN THE MEANING OF CHA PTER XIV-B OF THE ACT. WE THEREFORE DIRECT TO EXCLUDE THE SAME FROM BLOCK ASSESSMENT OF THE PRESENT ASSESSEE. 6. ON DUE CONSIDERATION OF THE ITATS FINDINGS WE ARE OF THE VIEW THAT LEARNED FIRST APPELLATE AUTHORITY WAS NOT HAVING TH E ORDER PASSED BY THE ITAT. THE ISSUE REGARDING TAXABILITY OF THE AMOUNTS ON SUBSTANTIVE BASIS OR 31 PROTECTIVE BASIS IS REQUIRED TO BE READJUDICATED AF TER THE FINDING OF THE ITAT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS CHALLENGED THE WITHDRAWAL OF 12A IN A WRIT PETITION BEARING NO.5044 OF 1997. THE HON'BLE HIGH COURT HAS STAYED THE ORDER O F WITHDRAWAL OF REGISTRATION UNDER SEC. 12A. HE PLACED ON RECORD CO PY OF THE ORDER PASSED BY THE HON'BLE HIGH COURT DATED 22.1.1998. WE FIND THA T THIS ORDER WAS VALID UP TO THE NEXT DATE OF HEARING I.E. 24.3.1998. WHAT HAD HAPPENED THEREAFTER HE HAS NOT PLACED COPY ON RECORD COPY OF ANY ORDER PASSED IN CIVIL WRIT PETITION NO. 5044 OF 1997 SUBSEQUENT TO 24.3.1988. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES WE SET ASIDE THE ISS UES TO THE FILE OF THE LEARNED FIRST APPELLATE AUTHORITY FOR READJUDICATIO N. 7. NOW WE TAKE ITA NOS. 1122 1126 & 1246/DEL/2011 . THESE THREE APPEALS PERTAIN TO ASSESSMENT YEAR 2005-06. SHRI CH ANDRA SWAMI HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 31.10.2005 DECLARING NIL INCOME. SIMILARLY THE TRUST FILED ITS RETURN O F INCOME ON 31.10.2005 DECLARING NIL INCOME. THE CASES OF BOTH THE ASSESS EES WERE SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE SHRI AJAY AGGARWAL CA AND SHRI M.S. SEKHON CA APPEARED FROM TIME TO TIME. AS SESSING OFFICER HAS 32 PASSED THE ASSESSMENT ORDERS IN THE CASE OF BOTH TH E ASSESSEES ON 20.12.2007 UNDER SEC. 143(3) OF THE ACT. ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN DETAIL IN THE ORDER OF THE TRUST AND THEREAFTER THI S ORDER HAS BEEN REPRODUCED IN THE ORDER OF SHRI CHANDRA SWAMI. ASSESSING OFFIC ER HAS COMPUTED TOTAL INCOME AT RS.13 32 858 AND ASSESSED IT ON PROTECTIV E BASIS IN THE HANDS OF THE TRUST AND ON SUBSTANTIVE BASIS IN THE HANDS OF SHRI CHANDRA SWAMI. ASSESSING OFFICER DID NOT MAKE ANY INDEPENDENT DISC USSION IN THIS YEAR RATHER HIS FINDINGS ARE ALMOST SIMILAR TO THAT OF A SSESSMENT YEAR 2002-03. HE WAS OF THE OPINION THAT SUFFICIENT MATERIAL WAS FOU ND DURING THE COURSE OF SEARCH WHICH DEMONSTRATES THAT TRUST IS MERE A FAA DE AND THE REAL BENEFICIARY IS SHRI CHANDRA SWAMI. AFTER TAKING INT O CONSIDERATION THE TOTAL AMOUNT OF DONATION AND BANK INTEREST HE COMPUTED T HE INCOME. HE DID NOT GRANT BENEFIT OF SECTIONS 11 AND 12 OF THE ACT TO T HE ASSESSEE TRUST ON THE GROUND THAT APART FROM WITHDRAWAL OF REGISTRATION U NDER SEC. 12A THERE ARE MATERIAL WHICH INDICATE THAT ASSESSEE WAS NOT CARRY ING OUT ANY CHARITABLE ACTIVITIES. 8. ON APPEAL LEARNED CIT(APPEALS) CONFIRMED THE OR DER IN THE CASE OF SHRI CHANDRA SWAMI HOWEVER IN THE CASE OF TRUST HE OBSERVED THAT ONCE ADDITIONS ARE CONFIRMED ON SUBSTANTIVE BASIS IN THE HANDS OF SHRI CHANDRA 33 SWAMI THEREFORE NO ADDITION IS REQUIRED ON PROTEC TIVE BASIS. HE DELETED THE PROTECTIVE ADDITION. 9. SHRI CHANDRA SWAMI IN HIS APPEALS HAS PLEADED T HAT THAT TRUST IS A GENUINE TRUST AND ASSESSING OFFICER HAS ERRED IN MA KING THE ADDITION ON SUBSTANTIVE BASIS IN HIS HANDS. SIMILARLY IN THE C ASE OF THE TRUST ASSESSEE REITERATED ITS CONTENTIONS. IT ALSO SUBMITTED THAT HON'BLE HIGH COURT IN ITS ENTRIM ORDER DATED 30.5.1997 IN THE WRIT PETITION F ILED BY THE ASSESSEE AGAINST CANCELLATION OF REGISTRATION HAD OBSERVED THAT DURI NG PENDENCY OF THE WRIT PETITION FOR FINAL DECISION THE EXEMPTION UNDER SE C. 11 OF THE ACT WILL NOT BE DENIED TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT PASSED IN THE BLOCK ASSESSMENT APPEALS HE PLACED ON RECORD COPIES OF THE TRIBUNALS ORDER. THE REVENUE IN ITS CROSS APPEAL IN THE CASE OF TRUST HAS PLEADED THAT LEARNED CIT(APPEALS) HAS ERR ED IN DELETING THE ADDITION MADE ON PROTECTIVE BASIS IN THE HANDS OF T HE TRUST. ACCORDING TO THE REVENUE THE ISSUE IN WHOSE HANDS ADDITION WILL BE MAINTAINABLE ON SUBSTANTIVE BASIS HAS NOT ATTAINED FINALITY. 34 10. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY AND WE FIND THAT THERE IS NO D ISPARITY IN THE FACTS AND CIRCUMSTANCES OF THIS ASSESSMENT YEAR VIS--VIS TH AT OF ASSESSMENT YEAR 2002-03. IN THAT ASSESSMENT YEAR WE HAVE OBSERVED THAT ASSESSEE FAILED TO PRODUCE THE ORDER OF THE HON'BLE HIGH COURT EXHIBIT ING THAT DURING THE PENDENCY OF WRIT PETITION EXEMPTION U/S.11 WOULD NO T BE DENIED. THE ORDER PRODUCED BY THE LEARNED COUNSEL FOR THE ASSESSEE WA S VALID TILL THE NEXT DATE OF HEARING. WHETHER ON THE NEXT DATE IT WAS MADE A BSOLUTE OR NOT IT IS NOT ASCERTAINABLE. WE HAVE OBSERVED THAT IN ASSESSMENT YEARS 1989-90 AND 1990- 91 AND IN THE BLOCK ASSESSMENT APPEAL ITAT HAS DIS CUSSED THIS ISSUE IN DETAIL AND IN THE LIGHT OF ITATS ORDER THE ISSUE REQUIRED READJUDICATION. THEREFORE FOLLOWING OUR OBSERVATIONS IN ASSESSMENT YEAR 2002-03 WE SET ASIDE THE ORDERS OF THE LEARNED CIT(APPEALS) AS WEL L AS OF ASSESSING OFFICER AND REMIT THESE ISSUES TO THE FILE OF THE LEARNED F IRST APPELLATE AUTHORITY FOR READJUDICATION. ALL THESE APPEALS ARE ALLOWED FOR S TATISTICAL PURPOSES. 11. NOW WE TAKE ITA NOS. 1123 1227 & 1247/DEL/201 1. THE PRESENT THREE APPEALS RELATE TO ASSESSMENT YEAR 2006-07. SH RI CHANDRA SWAMI AND THE TRUST HAVE FILED THEIR RETURNS OF INCOME ON 30. 3.2007 AND 31.10.2006 DECLARING NIL INCOME IN ASSESSMENT YEAR 2005-06 RES PECTIVELY. THE 35 ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING O FFICER ON 4.12.2008 IN BOTH CASES UNDER SEC. 143(3) OF THE ACT.. THE APPR OACH OF THE ASSESSING OFFICER IN DETERMINING THE INCOME OF BOTH THE ASSES SEES IS SIMILAR TO THAT OF ASSESSMENT YEARS 2002-03 AND 2005-06. HE DETERMINED THE INCOME OF SUBSTANTIVE BASIS IN THE HANDS OF SHRI CHANDRA SWAM I AND ON PROTECTIVE BASIS IN THE HANDS OF THE TRUST. THE TRUST HAS RECE IVED DONATION OF RS.21 44 505 AND INTEREST FROM BANK AT RS.2397. THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT RS.21 46 902. ON APPEAL LEARN ED CIT(APPEALS) CONFIRMED THE ASSESSMENT ORDER IN THE CASE OF SHRI CHANDRA SWAMI AND DELETED THE PROTECTIVE ADDITION FROM THE HANDS OF T HE TRUST. HENCE REVENUE IS IMPUGNING THE DELETION OF PROTECTIVE ADDITION WHER EAS SHRI CHANDRA SWAMI IS IMPUGNING CONFIRMATION OF ADDITION ON SUBSTANTIV E BASIS IN HIS HANDS. THE TRUST IS IMPUGNING DENIAL OF EXEMPTION UNDER SECTIO NS 11 AND 12 OF THE ACT. 12. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE DO NOT FIND ANY DISPARITY ON FACTS. THE ISSUES AGITATED BY THE PARTIES REQUIRED TO BE READJUDICATE D IN THE LIGHT OF OUR OBSERVATIONS MADE FOR ASSESSMENT YEAR 2002-03. HENC E WE ALLOW ALL THE APPEALS FOR STATISTICAL PURPOSES AND REMIT THESE IS SUES TO THE FILE OF THE LEARNED CIT(APPEALS) FOR READJUDICATION. 36 13. NOW WE TAKE ITA NOS. 1124 & 1128/DEL/2011. THE SE APPEALS RELATE TO ASSESSMENT YEAR 2007-08. ASSESSEE SHRI CHANDRA S WAMI HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 29. 8.2007 DECLARING NIL INCOME. THE TRUST HAS FILED ITS RETURN OF INCOME ON 29.10.2007 DECLARING NIL INCOME. BOTH THE CASES WERE SELECTED FOR SCRUTINY A SSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT WAS ISSUED. ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT IN THE CASE OF BOTH THE ASSESSEES ON 30.11.2009. HE DETERMINED THE TAXABLE INCOME AT RS.7 21 538 IN THE CASE OF SHRI CHANDRA SWAMI AND AT RS.2 21 53 8 ON PROTECTIVE BASIS IN THE CASE OF TRUST. IN THE CASE OF SHRI CHANDRA SWAM I ASSESSING OFFICER HAS OBSERVED THAT HE FAILED TO FURNISH DETAILS OF PERSO NAL EXPENSES AND THE SOURCE OF SUCH EXPENSES THEREFORE HE ESTIMATED THE EXPEN SES AT RS. 5 LACS. APART FROM THIS RS.5 LACS HE FURTHER ADDED RS.2 12 538 W HICH IS PROTECTIVE ADDITION IN THE CASE OF THE TRUST. IN THIS WAY THE INCOME HAS BEEN DETERMINED AT RS.7 21 538. ASSESSING OFFICER HAS MADE REFERENC E TO THE BLOCK ASSESSMENT PASSED IN THE CASE OF SHRI CHANDRA SWAMI . 14. ON APPEAL LEARNED CIT(APPEALS) DELETED THE PRO TECTIVE ADDITION MADE IN THE CASE OF THE TRUST HOWEVER HE UPHELD T HE OBSERVATIONS OF THE 37 ASSESSING OFFICER FOR DENIAL OF EXEMPTION UNDER SEC TIONS 11 AND 12 OF THE ACT. 15. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES WE DO NOT FIND ANY DISPARITY ON FACTS BETWEEN THIS ASSESSMENT YEAR AMONGST OTHERS I.E. ASSESSMENT YEARS 2002-03 2005-06 AND 2006-07. IN VIEW OF OUR DISCUSSION MADE IN THE FOREGOING PARAGRAPHS FOR OTHER YEARS B OTH THESE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES AND THE ISSUES ARE REMITTED TO THE FILE OF THE LEARNED CIT(APPEALS) FOR READJUDICATION 16. NOW WE TAKE ITA NO.1121/DEL/2011. IN THIS APPE AL THE ASSESSEE SHRI CHANDRA SWAMI IS IMPUGNING SUBSTANTIVE ADDITION MA DE IN HIS HANDS. 17. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE SHRI CHANDRA SWAMI HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04 ON 2 ND DECEMBER 2003 DECLARING NIL INCOME. A NOTICE UNDER SEC. 143( 2) DATED 23.6.2004 WAS ISSUED AND SERVED UPON THE ASSESSEE. HOWEVER NO ON E HAS ATTENDED THE PROCEEDINGS ON 30.7.2004 FIXED BY THE ASSESSING OF FICER. ASSESSING OFFICER THEREAFTER ISSUED NOTICES UNDER SEC. 143(2) AND 142 (1) OF THE ACT. AN EMPLOYEE FROM M/S. SEKHON & CO. CA APPEARED ON 16 .1.2006 AND FILED 38 CERTAIN DETAILS. THEREAFTER NO ONE HAS COME PRESEN T ON BEHALF OF THE ASSESSEE BEFORE THE ASSESSING OFFICER. HE PASSED THE ASSESSM ENT ORDER UNDER SEC. 144 OF THE ACT ON 13.3.2006. IT REVEALED TO THE ASSESSI NG OFFICER FROM THE AUDITED BALANCE SHEET THAT THE TRUST HAD RECEIVED D ONATION OF RS.14 31 995. BANK INTEREST IS OF RS.137. TOTAL RECEIPT IN THE HA NDS OF THE TRUST WAS COMPUTED AT RS.14 32 132. ASSESSING OFFICER ALLOWED AN ESTIMATED EXPENDITURE OF RS.1 LAC AND AN INCOME OF RS.13 32 1 32 WAS COMPUTED ON PROTECTIVE BASIS IN THE HANDS OF THE TRUST. AN ADDI TION OF THIS AMOUNT HAS BEEN MADE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. 18. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRIN G ANY RELIEF TO THE ASSESSEE. 19. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE FACTS AND C IRCUMSTANCES ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2002-03. THEREFORE IN VIEW OUR DISCUSSION MADE IN THAT ASSESSMENT YEAR IN THE FOREGOING PARAGRAPHS OF THE ORDER WE ALLOW THIS APPEAL ALSO FOR STATISTICAL PURPOSES AND REMIT ALL THESE ISSUES TO THE FILE OF THE LEARNED CIT(APPEALS) FOR READJUDICATION. 39 20. IN THE RESULT ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 21.10.201 1 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/10/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR